Which of the following situations would allow a shareholder to sue on behalf of the corporation?
A) If four of the five directors, in the best interests of the corporation, voted against the fifth as director, voted to end the employment contract of the fifth, and voted not to buy his shares.
B) If the corporation had been wronged (lost $30,000) by the negligent and fraudulent acts of one of its directors, but the corporation refused to make any action against the wrongdoer.
C) If the shareholders refused to enter into a shareholder's agreement.
D) If the directors took an action that unfairly prejudiced a shareholder.
E) If the directors issued shares without offering any of the new issue to the present shareholders.

Question

Quizplus · Accepted Answer

In situation B, a shareholder can sue on behalf of the corporation (a derivative suit) when the corporation itself has been wronged (e.g., financial loss due to a director's negligent and fraudulent acts) and the corporation refuses to take action against the wrongdoer. This allows shareholders to seek justice and recover losses for the corporation when its own management fails to do so.

Which of the Following Situations Would Allow a Shareholder to Sue