Explain the requirements of the Duty of Care, the Duty of Loyalty, and the Business Judgment rule. Who or what are these duties designed to protect? Are these duties necessary? Why or why not?
Part 2
A longtime friend and client approaches you and explains that he has the opportunity to purchase a company that has developed a very lucrative technology. Unfortunately, the company has had some legal issues with clients and vendors in the past. Your friend assures you that, going forward, he can resolve the problems that have led to the legal issues, but he does not want to be held liable for the company’s past failings. Your friend asks you to give your opinion on whether he should purchase the stock of the company or purchase only the assets. Which method of acquisition would you recommend and why? Use this week’s lecture as a basis for your post. Respond to at least two of your classmates’ posts.
Answer preview
Many investors, especially those seeking to invest their money into companies with legal problems, often deal with the dilemma of whether to purchase a company’s stock or its assets (Melchiorre, 2016). Deciding, either way has its advantages and ramifications. In my friend’s case, I would advise him to purchase the assets of the company he intends to invest in rather than its shares. My friend wants to invest in a technology company riddled with legal issues. One advantage of an asset purchase is that it allows an investor to choose which assets they would like to buy, and as such, they can avoid those tangled up with legal problems (Melchiorre, 2016). Even though the contracts governing these assets will have to be changed, it is a worthwhile investment venture that might also help my friend get numerous tax benefits.
