NORTH SOUTH UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF LAW

Course: Legal Environment of Business

Course Code: Law 200

FINAL EXAMINATION
ASSIGNMENT OF SPRING 2020
 ANSWER TO THE QUESTION NO- 1

Here, we can see that Fiat Chrysler Automobiles (FCA) wanted a potential merger with General
Motors (GM), where the merger would see the two automakers share vehicle platforms,
distribution channels, and technology. But GM ignored that merger. So clearly, that indicates
that hostile acquisition took place here. Here, the target company is GM, who did not want the
deal to go through. So, in that case, GM's management will defend against hostile takeover
potential bidding by the acquirer company FCA. There are barely any approaches to protect
against an unfriendly takeover. The most efficient ways are built-in defensive measures that
make a company challenging to take over. There are few methods given below for GM for
protection against potential bidding:

1. Golden Parachute intends to provide bonuses or awards to its CEO or senior management
on a large scale in cash or stock if the company is acquired. So, GM can use this method and
can give a large amount of bonus or award in cash or stock to its CEO Mary Barra which will
make the acquisition more high-priced and less tempting. GM can use this method as an
anti-takeover measure in which few benefits may include stock options, generous severance
pay, and cash bonuses. (Ed Grabianowski, 2005)

2. Super Majority is a defensive method that requires the majority vote (generally 67% to
90%) of shareholders to approve of any hostile takeover potential bidding. GM can use this
defensive measure, which will make it way much difficult for FCA to direct a takeover by
buying sufficient stock for a controlling interest. So, the CEO of GM Marry Barra can call up
a meeting with its shareholders (i.e., David Einhorn, etc.) and describe all the necessary
things and outcomes to those shareholders and introduce the voting system in terms of
supermajority defensive method. So, GM can use this supermajority amendment as a
 defensive measure against the potential bid and ensure its survival as an independent
company. (James Chen, 2019)

3. Flip-In Poison Pill can be used as a defensive strategy by GM to make them less attractive to
the potential bidder FCA. In this method, GM will allow its existing shareholders to purchase
shares, stocks, or other securities of the target at a discount or a below-market price. The
provision of the flip-in poison pill method can be found in the company's charter or bylaw,
which indicates that GM can use it as a defensive measure against potential bidding. i.e.,
GM can give allowance to its major shareholder David Einhorn to purchase shares, stocks,
or other securities of the target at a discount or a below-market price. So, it is purely a
defensive strategy that will dilute the number of shares, stock, or other securities of GM.
(James Chen, 2019)

4. Greenmail can be used as an anti-takeover strategy by GM. Greenmail is like blackmail.

Following this tactic, GM can pay a premium, which is known as greenmail, to repurchase
its stock shares at dilated prices from a corporate rider (i.e., David Einhorn, etc.). After
receiving the greenmail payment, the raider usually agrees to discontinue the hostile
takeover bid and won't purchase any more shares for a specific time. (Adam Hayes, 2019)

5. GM can issue the maximum amount of shares or stocks of the company to its investors,
which are known as the issuance of stock. But it needs to comply with securities laws. If the
shareholder (i.e., David Einhorn, etc.) decides to purchase the new stock in full, then their

position won't be diluted. So, issuance of stock will act as a defense against the bidder
control. (James P. Dow, Jr., 2009)

By following and implementing the given steps, GM can protect themselves against the
potential bidding from FCA.
 ANSWER TO THE QUESTION NO- 2
After analyzing the given fact, I can understand that the transferor-company MIHEER H.
MAFATLAL (MHM) was proposed to be amalgamated with the respondent-organization
MAFATLAL INDUSTRIES LTD. (MIL). The directors of the respondent-organization MAFATLAL
INDUSTRIES LTD. (MIL) and transferor-organization MIHEER H. MAFATLAL (MHM) endorsed
the proposition for amalgamation of the MHM with MIL and by the separate Resolutions
passed by them, and the nitty-gritty Scheme of Amalgamation was finished.

In the gathering of equity shareholders assembled compliant with the request for the High
Court, the majority part of the shareholders of the respondent transferee organization
endorsed the Scheme. The main issue is regardless of whether the plan of amalgamation is
prejudicial to the interests of minority investors. And also, the directors of MHM got corporate
opportunities for personal profit from merging with a sick and non-profitable company MIL.

 From my point of view, the directors of MHM did a heinous crime. As I know, A corporate
opportunity alludes to any business opportunity that may profit a company. The corporate
opportunity doctrine oversees the legal obligation of directors, officials and controlling
investors or shareholders in a company, under the Duty of loyalty, not to accept such
opportunities for themselves without first uncovering the chance to the board of directors of
the company and allowing the committee the opportunity to decay the possibilities in the
interest of the company. If the procedure is violated and a corporate fiduciary accepts the
corporate opportunity anyway, at that point, the fiduciary has damaged its obligation of loyalty,
and the company will be entitled to a useful trust of all benefits obtained from the unfair
exchange. (www.law.cornell.edu)

According to Guth v. Loft Inc, 5 A.2d 503, 23 Del. Ch. 255 (Del. 1939) is a Delaware
corporation law case on corporate opportunities and the Duty of loyalty – ". . . a corporate
officer or director may not take a business opportunity for his own if: (1) the corporation is
financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of
 business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking
the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimical
to his duties to the corporation. The Court in Guth also derived a corollary which states that a
director or officer may take a corporate opportunity if: (1) the opportunity is presented to the
director or officer in his individual and not his corporate capacity; (2) the opportunity is not
essential to the corporation; (3) the corporation holds no interest or expectancy in the
opportunity; and (4) the director or officer has not wrongfully employed the resources of the
corporation in pursuing or exploiting the opportunity. Guth, 5 A.2d at 509." (Nate Emeritz and
Brian Currie, Rosati & Wilson Sonsini Goodrich, 2020)

Different components are considered in choosing whether a director has damaged his Duty
of loyalty; however, the fundamental test is one of decency. Various standards are commonly
applied to determine whether the exchange was fair, including whether (1) the director was
guilty of overextending ; (2) the company got full worth; and (3) the contract was gone into
basically to assist the company and not fundamentally to help the directors. (Eric Fryar)

According to the efficient analysis mentioned above, the directors of MHM did intolerable
crime because they got corporate opportunities for personal profit from merging with a sick
and non-profitable company MIL. So, they broke their Duty of loyalty because they should have
focused only on the betterment of the company; instead, the directors of MHM only cared
about their benefits, and neither they think about those minority shareholders. So, they have
crossed their farthest limit to achieve their gains.

 As the majority part of the shareholders of the respondent transferee organization endorsed
the Scheme, so how will the minority be protected? As a small number of shareholders
remained against the Scheme.

In the given case, the minority shareholders affected by the decision of the majority, and
objections were raised by other prominent portion of shareholders that the amalgamation is a
sense of fraud which goes over the powers of the directors. So minority can be protected by the
widely recognized minority shareholders rights:
1. Fiduciary Duty Owed by Majority Shareholders: Most of the states' corporation laws state
that the significant part of the shares owes a trustee obligation to the minority investors.
This implies the majority of shareholders must have arrangements with minority investors
with openness, genuineness, high confidence, steadfastness, and decency. But in this given
case, the majority of shareholders have penetrated Fiduciary Duty to the minorities, and
the minorities may have the option to document a shareholder derivative action. This is a
particular sort of lawsuit accessible to a shareholder when corporate administration realizes
that an official, executive, representative, or investor has occupied with self-managing and
neglects to ensure the premiums of the company. So, the directors Of MHM got corporate
opportunities for their benefits, and after all that, the majority of shareholders approved
the Scheme. Thus, minorities can file a shareholder derivative action.

2. Minority Discount: A minority discount allotted to minority shares when a privately owned
business esteems its shares in arrangement to sell or move proprietorship. In the given
case, MIL and MHM were also amalgamated. So, they should provide a minority discount to
protect minority shareholders where minority shareholders can purchase shares for less
than other investors and as yet getting a large number of similar advantages of stock
proprietorship.

3. Benefit from Shareholdings: The company directors can choose not to buy dividends or not
to buy shares from investors. If minority shareholders believe that a more significant part of
shareholders is stifling minorities' rights to profit by shareholdings, the time has come to
talk with an accomplished lawyer. The lawyer can help the minority shareholders follow the
best possible methodology and power the company to buy their offers for a worth
determined by a court.
 4. The most crucial protection afforded to minority shareholders comes in the form of a legal
cure at section 233 of the Companies Act, 1994 of Bangladesh. So to be qualified to record
an appeal under the article, the minority shareholder(s) must hold at least 10% of the issued
shares in the case of an organization having a share capital like MIL and MHM. Such a
request might be documented by a minority investor must be that the undertakings of the
organization are being led or the forces of the directors are being practiced in a way biased
to at least one of its investors or that the organization is acting or is probably going to work
in a way which discriminated or is expected to distinguish the interest of any shareholder.
(Reshad Imam, 2018)

By following the given procedures, the minority might be protected.

ANSWER TO THE QUESTION NO- 3

After analyzing the given fact, I can understand that Mr. Rezaul Huq, who is a diploma
engineer, appointed in "Radiant International Corporation" for a one year probation period on
10.02.2018. As I can see, he completed his probation period, and according to the judgment of
the Supreme Court, he may be qualified to be a permanent employee. But he got a notice of
allegation from the administrative officer on 07.12.2019 during his course of employment. But
he remained silent for the next eight days and got his final termination from the same authority
on 15.12.2019. After almost three months, he submitted his written statement against the said
allegation on 20.02.2020. In this specific point I want to add that:

 As per Labour Act 2006, section 24, "no order for punishment will be made against a worker
except if the claim against him is recorded as writing, he is given a duplicate of charge and at
any rate, seven days is given to clarify, he is given the chance of hearing. No order for
punishment will be made against a worker except if the worker is seen as blameworthy after an
inquiry made by the inquiry board of trustees comprising agents of business and the worker and
such investigations will be finished up inside 60 days. The company or the director affirms the
request for excusal if punishment will not be made against a worker. A worker charged for
unfortunate behavior might be suspended pending an enquiry into charge except if the issue is
pending under the steady gaze of any court, and such suspension will not surpass 60 days."
(Jural Acuity)

But in this case, the written notice of allegation has been sent to Mr. Rezaul Huq, but he
remained silent for straight eight days. Then on a ninth day on 15.12.2019, after the complaint,
the same authority gave him the final termination. After getting the final termination again, he
remained silent for almost three months and submitted his written statement against the said
allegation on 20.02.2020, where he should have clarify his position within seven days. In this
specific point, Mr. Rezaul Huq did not show up after getting the chance to explain. After seeing
this written statement, the authority arranged a so-called investigation committee. The
investigation committee prepared a report within three days and submitted it for taking proper
action. Following this report, the administration sent another letter to Mr. Rezaul Huq, stating
the fact that the allegation against him is found as accurate.

So at this point, Mr. Rezaul Huq has 60 days to defend him and chance not to be punished if
his statement against the allegation is proved as valid. When deliberate settlement apparatus
neglects to fathom questions, and the last resort is taken through legal settling. So, The Labour
Tribunal and Labour Appellate Tribunal can enforce their jurisdiction on this issue.

 THE LABOUR TRIBUNAL: Mr. Rezaul Huq can file a case containing the valid prove which can
defend him in the Labour Tribunal in case of dissatisfaction for the allegation that has been
made against him by the administrative officer of Radiant International Corporation. On
the other hand, the authority of Radiant International Corporation can also file a case in
the Labour Tribunal if they have a solid allegation against him. After completing the trial in
Labour Court, if the decision goes against Mr. Rezaul Huq or Radiant International
Corporation, they have to move on to The Labour Appellate Tribunal.
 THE LABOUR APPELLATE TRIBUNAL: If Mr. Rezaul Huq or Radiant International Corporation
aggrieved by the decision of The Labour Tribunal may lean toward an intrigue to the Labour
Appellate Tribunal within 30 days of its pronouncing.
 JUDICIAL SCRUTINY: It's an expression much of the time applied to a court survey of
legislative or administrative actions. If any action by the Labour Tribunal and Labour
Appellate Tribunal reflects the procedural deformity, abnormalities, unfairness, segregation,
and prejudice, then those actions will be reviewed under the term Judicial Scrutiny.

REFERENCE

1. Ed Grabianowski "How Hostile Takeovers Work," December 30, 2005.

HowStuffWorks.com. <https://money.howstuffworks.com/hostile-takeover.htm> May 19, 2020.
2. James Chen "Supermajority," May 9, 2019. investopedia.com <
https://www.investopedia.com/terms/s/supermajority.asp> 22 May 2020.
3. James Chen "Flip-In Poison Pill," June 25, 2019. investopedia.com <
https://www.investopedia.com/terms/f/flip-in-poison-pill.asp> 22 May 2020.
4. Adam Hayes "Greenmail," April 23, 2019. investopedia.com <
https://www.investopedia.com/terms/g/greenmail.asp> 22 May 2020.
5. California State University, Northridge; Small Business Finance and IPOs; James P. Dow, Jr.;
2009.
6. Nate Emeritz and Brian Currie, Rosati & Wilson Sonsini Goodrich "Corporate
Opportunity Doctrine: Litigations Continues into 2020," February 27, 2020.
https://corpgov.law.harvard.edu/
<https://corpgov.law.harvard.edu/2020/02/27/corporate-opportunity-doctrine-
litigation-continues-into-2020/> May 30, 2020.
7. Eric Fryar "Corporate Opportunity Doctrine." https://www.shareholderoppression.com <
https://www.shareholderoppression.com/corporate-opportunity-doctrine> May 31,
2020.
8. “Corporate Opportunity.” www.law.cornell.edu <
https://www.law.cornell.edu/wex/corporate_opportunity> May 31, 2020.
9. Reshad Imam "Protecting Minority Shareholders," April 17, 2018. www.thedailystar.net
< https://www.thedailystar.net/law-our-rights/protecting-minority-shareholders-
1563298> May 31, 2020.
10. "Protecting Minority Shareholders" https://www.lawyersnjurists.com
<https://www.lawyersnjurists.com/article/protection-of-rights-of-minority-
shareholders/> May 31, 2020.
11. Jural Acuity "Termination of Employment under Bangladesh Labour Act 2006."
https://www.hg.org < https://www.hg.org/legal-articles/termination-of-employment-
under-bangladesh-labour-act-2006-54206> June 1, 2020.