
Business Law Help?
Jack Squelch is the CEO and 25% stockholder of GEE Inc. He receives an offer to buy the company from a LBO firm called Asset Strippers Inc. He knows that Asset Strippers is interested in selling off the real estate assets of GEE and want to make a quick buck that way. They offer him $35/share as against the prevailing market price of $25. He does not appoint independent consultants to evaluate the bid, and advises the Board of Directors that the offer is a good one and that the company should accept it. The Board acts on this advice and passes a resolution to sell the company to Asset Strippers Inc.
Has any violation of the Securities Laws been committed?
Is there a real life example of a similiar violation?
It's probably a violation of the law because the Board hasn't hired an outside investment bank to evaluate the "fairness" of the offer and therefore render an opinion as to the value of the company and appropriateness of the offer. Otherwise, minority shareholders would be severely disadvantaged.
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