Corporation Transactions and Misrepresentation of Financial Reports Business law also called commercial law is a branch of civil law that governs business as well as, commercial transactions, and deals with both the private and public law. The branch created to ensure that, they are no exploitation and manipulation of people as well as rules and regulation in order to benefit some members of a business. This means that should one break or manipulate the rules and regulation in his favor. The or she must face the court in accordance with the law. With legal rights of all investors considered as an important element of the business law, we examine the board changes within the filling of the shareholder derivative lawsuits and might not be frivolous. Also, lack of highly competent employees within a business can lead to tremendous losses and to some extent closure of the business in accordance with law, due to the loss incurred. This is due to unethical factors arising due to misrepresentation of financial position of the company.

Introduction

Legal wise, protection of shareholders' rights is considered as an important element of business law and governance (Shleifer & Vishny, 1997). Therefore, the law allows the shareholders to bring lawsuits against managers or directors, when they realize that managers have exploited or manipulated their position of control inappropriately. There are proper rules and regulations set aside to dealing with issues of lawsuits (Beck & Bhagat, 1997). Also, there is enough evidence of business or corporative governance changing in certain lawsuits (Jones & Weingram, 1996).

Financial misrepresentation is the failure to provide accurate and correct portrait of financial position of a company. This is against the business law (Jensens, 2004). Since all have different cultures with values and ethics, it is unethical for a company not to provide clear financial position, and this affect the company's stakeholders.

Cases

A case where Modell owned 80% of Cleveland stadium, 53%...

Browns board consisted of Modell, the outside lawyer of both company, three individuals employed by both Corporation and Gries. Modell propose that Browns buys the stadium for $6 million and Gries objects saying that that stadium appraised for only $2 million. The Brown board approves the purchase by all directors other than Gries voting in favor. Gries commenced shareholders derivative suit seeking to rescind the purchase.
Modell won the case. This is because the corporate governance indicates that directors owe a fiduciary duty to their corporation as well as to the shareholders (Fletcher, 1965). However, the, a director does not owe a fiduciary duty the rest of shareholders of the terms of directors to the third party. Even in cases, where the director may be paid more per share than the rest of shareholders (Tyron, 1995).

As a director dealing with corporation, one must be fair enough, open as well as honest. This is because directors showing personal interest in the Corporation transaction is said to be dishonest and unfair. In a case, Modell do not show personal interest when proposing the purchase, despite owning 80% of the company. And even the other directors who vote in his favor do not have a personal interest too. This fact makes him win the case, since Modell discloses all the facts about the purchase taking no advantage of his position, dealing fairly and openly to show the benefits to the company.

The transaction was fair, open, and the corporation was willing to take the opportunity. This is evidence by the fact that majority voted in Modell favor, without personal interest. The court also had it is own ways to examine fairness, honesty and personal interest at large in order to rule the case.

A Fortune 500 CFO admits to having treated $4 billion in operating expenses as assets, hence showing profit instead of loss. The stock drops by 95% and bond covenant related to billion breached. Later they sold the stock for $15 million generating $10 gain…