Author Question: Discuss the use and types of stock options.[br][br][b][color=#9E3EA8]Question ... (Read 79 times)

jenna1 · **on:** Jun 24, 2018

Discuss the use and types of stock options.

Question 2

Clarence is the trustee of a trust. With 75,000 of his own money, Clarence purchases a parcel of real estate. Two months later, he sells the parcel to the trust for 150,000 and pockets the profit. Discuss the situation in terms of the duties and powers of the trustee.

okolip · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

Stock options entitle their holders to purchase from the corporation shares of a specified class or classes of stock. A stock warrant is a type of stock option that typically has a longer term and is freely transferable. A stock right is a short-term warrant. The board of directors determines the terms upon which stock rights, options, or warrants are issued; their form and content; and the consideration for which the shares are to be issued. Stock options and warrants may be used in incentive compensation plans for directors, officers, and employees. They may also be used to help a corporation raise capital by making one class of securities more attractive by including in it the right to purchase shares in another class.

Answer to Question 2

Clarence has breached his fiduciary duty to the beneficiaries. Although he does have the power to purchase property on behalf of the trust, he may not use the trust for his own personal gain. He can be compelled to turn over to the trust the profit that he made on the transaction. It is also possible that he can be ousted as trustee and that he may be liable for punitive damages for breach of his fiduciary duty to the trust.