duty of care 1

Question 1

C. Standard duty of care

Answer 1

1. Directors must discharge their duties in good faith and with that degree of diligence, care, and skill which ordinarily prudent men would exercise under similar circumstances in like positions.

Question 2

D. Leverage- Other peoples money:

Answer 2

1. Best option is whatever level of risk you are willing to take2. Leverage makes everything more serious- both gains and losses.

Question 3

E. Directors and officers are charged with knowledge of

Answer 3

those things which it is their duty to know and ignorance is not a basis for escaping liability.

Question 4

1. Where suspicions are aroused, or should be aroused,

Answer 4

it is the director’s duty to make necessary inquiries.

Question 5

F. The BJR shields a director from liability in the case of

Answer 5

an honest error in judgement.

Question 6

in order to come within the ambit of the BJR, a director must

Answer 6

be diligent and careful in performing the duties he has undertaken.

Question 7

G. Hedging & Options

Answer 7

put & call

Question 8

1. Put

Answer 8

is the right to make someone else pay

Question 9

2. Call

Answer 9

the right to buy from someone else at a specified price.

Question 10

H. When interest of co. and owner of company are different (doing bad)
1. Options

Answer 10

a. Borrow money to try and stay in business
b. Sell part ownership to raise money to stay in business
c. File for ch 11- reorganize and stay in business
d. File for ch 7 liquidate
e. Assignment for the benefit of the creditors.
f. Statutory dissolution

Question 11

2. If you want to sell:

Answer 11

a. Go to court have the liquidator hire an auctioneer to liquidate the assets. If you do it yourself and don’t get enough- opens yourself up to veil being pierced.

Question 12

I. You can avoid duty of care.

Answer 12

1. You cant avoid duty of loyalty.