CORPORATIONS-RATIFICATION BY STOCKHOLDERS WHO CONTROL A MAJORITY OF THE STOCK OF THEIR OWN VOIDABLE CONTRACTS MADE AS DIRSCTORS-RIGHTS OF THE MINORITY STOCKHOLDERS

Authors

Abstract

A, B, and C are directors of, and own all the stock in, X Corporation. At a directors' meeting B and C, over A's vote, resolve to pay themselves $50 per week as salary for serving as president and manager respectively. Subsequently at a stockholders' meeting B and C who control a majority of the stock vote to ratify their act as directors; A voting against the resolution. A files a bill in equity, alleging that the salaries are excessive, and asks that the payment of excessive salaries be enjoined, and that B and C be required to account for excessive salary already received. The suit is in a jurisdiction where contracts which directors enter into with themselves are held to be voidable at the election of the corporation. The questions are raised, as in many similar cases : May B and C as majority stockholders vote to ratify their own voidable acts as directors, and if they may do so, on that theory may A obtain relief.

Recommended Citation

CORPORATIONS-RATIFICATION BY STOCKHOLDERS WHO CONTROL A MAJORITY OF THE STOCK OF THEIR OWN VOIDABLE CONTRACTS MADE AS DIRSCTORS-RIGHTS OF THE MINORITY STOCKHOLDERS, 28 Mich. L. Rev. 181 (1929).
Available at: https://repository.law.umich.edu/mlr/vol28/iss2/6