Reference no: EM132264515

Homer, single & Marge, married with one child, are starting a business to provide computer consulting services, web design and software development. They will locate in Los Angeles, California. Homer is willing to contribute $50,000 to the business. Unfortunately, Marge has no money to contribute, but has the computer expertise, the essential contacts and is a graduate of the UCLA Anderson School. In fact, Marge already has two potential new clients, one located in Arizona. They hope to open a second office in Arizona within a few years. They would like to participate equally in making all decisions. They estimate that $100,000 will be enough money to pay all expenses for 12 months at which time they project that revenues will cover expenses. Homer and Marge plan on reinvesting most of the earnings with the goal of expanding and selling the business. They have decided on the name Virtual Construction, Inc., but will be doing business as “Vircon.” Marge also serves as an outside director on the board of directors of Cellular Information Systems (CIS). CIS has five members on its board and approximately 500 shareholders. During a special meeting of directors of CIS, all five directors present voted to declare a $100,000 cash dividend. However, three of the directors learned through their position as CIS officers that CIS had just lost a customer who was its chief source of revenue. This information was not disclosed at the meeting, although all the other board members asked numerous questions about the financial situation of the company.

A) Discuss the legal basis, if any, on whether each of the CIS directors can be held personally liable for approving the dividend.