Reference no: EM132167956

Instructions

One of The Bluth Company’s (“TBC”) chief competitors, Stan Sitwell, purchases some stock in TBC (because some TBC shareholders decided to unload their shares because they wanted the cash). TBC has adopted cumulative voting of shares. At the next shareholder meeting, Stan wants to exercise as much influence as possible and hopefully get one of his trusted advisors onto the board of directors of TBC. Stan owns 100,000 shares of TBC (out of a total of 1,000,000 outstanding shares), and there are 4 directorships up for election. All of the other shareholders besides Stan will vote an equal number of shares for each open directorship. The federal government sues TBC for taking federal funds to build a wall between the U.S. and Mexico and then failing to build the wall. The government sues TBC, but also each individual shareholder of TBC under the doctrine of piercing the veil. TBC has done a good job of holding annual meetings of directors and shareholders.

However, certain TBC shareholders (namely, George Bluth, Lucille Bluth, Lindsay Funke, and Gob Bluth) have used the corporation’s bank account for personal reasons repeatedly. Stan Sitwell has never done this, however. Stan decides that he wants to own all of TBC, but the TBC directors don’t think it’s a good idea to sell to Stan, so Stan decided to make a tender offer directly to the TBC shareholders.

Please answer the following questions:

Is Stan guaranteed to be able to gain a seat on the board of TBC? Explain why or why not.

Will the federal government be able to recover under its lawsuit against Stan personally? (i.e. not just from the corporation, but from his own individual wealth?) Why or why not?

Discuss three ways the TBC directors could try to defend against Sitwell’s tender offer and keep him from acquiring control of the company.