Guy Is Hot Java Company's Majority Shareholder

question 17

Essay

Guy is Hot Java Company's majority shareholder. Guy is interested in developing a reward system for the company where dividends double for any shareholder who takes a large risk by owning more than 35 percent of the shares. Guy is the only shareholder who owns that much stock. Does Guy owe a duty to Hot Java or its minority shareholders in this situation?

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Definitions:

Face Value

The nominal or original value of a security or financial instrument as stated by the issuer, unrelated to its market value.

Specific Date

Refers to a detailed and exact date on the calendar specified for an event or deadline.

Premium

The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount.

Straight-Line Method

A depreciation method where the same amount of depreciation expense is allocated evenly over the useful life of an asset.