Interpret the legal factors involved in corporate management and Essay - 1

Interpret the legal factors involved in corporate management and ownership - Essay Example For instance, share holders can sue the board of directors for an act they negligently commit or in breach of set By-laws. Jane, who is a share holder, is aggrieved by the boards’ decision to invest heavily in the company’s growth in negligent reliance on its officer’s financial reports. It is therefore important to establish whether the directors are liable or not while giving reasons for or against this assertion. In establishing liability, the most important consideration is whether the management acted within their authority or not which is derived from the company’s By-laws. This is the main reference in case of any conflict. However, there are general duties expected of officers which seem inherent in all corporations. Directors or officers to any Corporation are expected to perform daily duties with loyalty and obedience. â€Å"Among the daily duties of such workers include strategic planning, putting in place internal controls to ensure proper book keeping, implementing any devised strategies and setting up committees† (Whincup, 1998). The above case reveals a kind of directors who present faulty financial reports and the shareholder on full reliance of the reports incurs considerable losses. The directors in this question acted within their authority since book keeping falls within their job specification. However, they can be discharged from this liability if they can show that they acted in good faith and not in a fraudulent manner. This comes in especially where other persons acted on their behalf. They are however still liable since the acts were committed by their agents. The business judgment rule can be a good defense for the officers. â€Å"The rule immunizes corporate management from liability for actions that are undertaken in good faith, when the actions are within both the power of the corporation and the authority of the management† (Miller, 2011). From the foregoing, the