Question

The board members of Company A, Inc. are considering purchasing a warehouse for the storage of inventory for the company. During the consideration of different warehouses from the realtor, the board votes to purchase the warehouse in Ohio as a centrally located warehouse to their Michigan headquarters. During the discussion, not many options were discussed regarding each property, and the board rushed the process. One of the board members stated that the process did not require much time because they relied on the information and reports from the realtor. It is later discovered that a board member, Lisa, owned 10% of the Ohio Warehouse that the company purchased. She has stated that the warehouse was 10% hers as a result of a property settlement years ago, and she did not see her small interest ownership as being something to the level that she was going to greatly benefit from the sale, so it was nothing she felt a concern about. Some of the shareholders feel this decision may not have been in the best interest for the company and are considering legal action against the board.
a. Explain what defense the board members have regarding their decision in this situation to purchase the Ohio warehouse.
b. Explain what defense the board member, Lisa, would be able to raise regarding her 10% ownership interest of the Ohio warehouse?
c. If you had to advise the board on what would have been the best process to handle this warehouse decision, knowing the facts now and that Lisa was an owner of the Ohio warehouse, what would have been the proper method for the board to approve this warehouse purchase?

Answer 1

Answer:

The board members of Company A, Inc. are considering purchasing a warehouse for the storage of inventory for the company. During the consideration of different warehouses from the realtor, the board votes to purchase the warehouse in Ohio as a centrally located warehouse to their Michigan headquarters. During the discussion, not many options were discussed regarding each property, and the board rushed the process. One of the board members stated that the process did not require much time because they relied on the information and reports from the realtor. It is later discovered that a board member, Lisa, owned 10% of the Ohio Warehouse that the company purchased. She has stated that the warehouse was 10% hers as a result of a property settlement years ago, and she did not see her small interest ownership as being something to the level that she was going to greatly benefit from the sale, so it was nothing she felt a concern about. Some of the shareholders feel this decision may not have been in the best interest for the company and are considering legal action against the board.

a. Explain what defense the board members have regarding their decision i

Explanation:

I don't know