A member of the board of directors of Central Communications Co. is offered a license by a third party to operate a cellular phone system. The director does not present this offer to the board of directors for approval but informally mentions it to a fellow board member, who does not think it will be a problem. The director buys the license. Which of the following statements is correct regarding the director's actions? A. The director breached a duty of loyalty by usurping a corporate opportunity. B. The director breached the duty of due diligence. C. The director acted properly in purchasing the license. D. The director breached a duty of care by failing to use prudent business judgment.

Question

Dominik Brennan

Business

15 April, 23:21

A member of the board of directors of Central Communications Co. is offered a license by a third party to operate a cellular phone system. The director does not present this offer to the board of directors for approval but informally mentions it to a fellow board member, who does not think it will be a problem. The director buys the license. Which of the following statements is correct regarding the director's actions? A. The director breached a duty of loyalty by usurping a corporate opportunity. B. The director breached the duty of due diligence. C. The director acted properly in purchasing the license. D. The director breached a duty of care by failing to use prudent business judgment.

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Answers (1)

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Laura Charles · Answer 1

Option A

Explanation:

The director has breached the implied duty of loyalty which says that the director must not take misadvanage of his position because there are many opportunities that he can benefit from by gaining from his personal interest and avoiding his duty to maximise the shareholders wealth.