Fact Pattern 40-3A
Atlantic Corporation's articles of incorporation prohibit a sale of its assets with?out a vote of the board of directors. Atlantic's officers sell some assets to Pacific Company without notice to the board. The officers also fail to pay Atlantic's taxes on time, and some Atlantic funds are not accounted for.
-Refer to Fact Pattern 40-3A. With respect to Atlantic's share?holders, this conduct is most likely
A) not oppressive because it is undertaken by Atlantic's officers.
B) oppressive because Atlantic's directors may be personally liable.
C) oppressive because Atlantic's shareholders may be personally liable.
D) oppressive because it departs from the standards of fair dealing.

Question

Fact Pattern 40-3A 
Atlantic Corporation's articles of incorporation prohibit a sale of its assets with?out a vote of the board of directors. Atlantic's officers sell some assets to Pacific Company without notice to the board. The officers also fail to pay Atlantic's taxes on time, and some Atlantic funds are not accounted for.
-Refer to Fact Pattern 40-3A. With respect to Atlantic's share?holders, this conduct is most likely
A) not oppressive because it is undertaken by Atlantic's officers.
B) oppressive because Atlantic's directors may be personally liable.
C) oppressive because Atlantic's shareholders may be personally liable.
D) oppressive because it departs from the standards of fair dealing.

Quizplus · Accepted Answer

The conduct described in the fact pattern departs from the standards of fair dealing and therefore may be considered oppressive to Atlantic's shareholders. The unauthorized sale of assets and failure to pay taxes and account for funds could harm the value of Atlantic's shares and the interest of shareholders, who entrusted the officers with managing the corporation. While the directors may also bear some responsibility for the breach of the articles of incorporation, the conduct of the officers is the primary concern for shareholders in this case. Personal liability of shareholders is not mentioned in the fact pattern.