Question

Paul is the shareholder that owns most (90%) of the outstanding stock of Purple Machine, Inc. (a corporation). Paul is not involved in the day-to-day running of Purple Machine, Inc. However, last week he approached by Red Supply Corporation with what he believed to be a very favorable Supply Agreement for the purchase of inventory that Paul is certain Purple Machine, Inc. can use. Paul signs the Supply Agreement on behalf of Purple Machine, Inc.
• Is the execution of the Supply Agreement valid against Purple Machine, Inc.? Why?
• Suppose Paul approaches David, a director on the board of directors of Purple Machine, Inc., about the transaction with Red Supply Corporation, and David thinks it’s a great deal. David executes the agreement on behalf of Purple Machine, Inc. Is the execution of the Supply Agreement valid against Purple Machine, Inc.? Why or why not?

Answer 1

Answer:

Can Paul larger part investor consent to arrangement for the benefit of his organization when he isn't involved in day to day operations of purple machine, inc?

This relies upon laws framed by board of directors. In phenomenal case board of directors can approves Paul to sign the agreement for the benefit of partnership. In any case, this is practically not conceivable in light of the fact that he isn't engaged in day to day operations of purple machine, inc. As a greater part investor he doesn't have position to sign if board dismisses, this is on the grounds that organization is an separate entity and doesn't go under investors.

Could David one of the board member from purple machine, inc execute agreement?

No, according to companies law David can't execute agreement until board of directors approves it. According to law, board has to authorize who has to sign agreement and execute it. Generally Chairmen, CEO and Treasury secretary are authorized to do enter in to any agreements on behalf of the company. Henceforth board individuals can't execute it. In phenomenal cases board can approve David to execute it.