Arthur is a shareholder of Rowson, Inc. He has evidence to suggest that its president/CEO has allowed the corporation to engage in acts that are ultra vires . Based upon this evidence, Arthur contacts an attorney and sues the corporation on behalf of the corporation. The lawsuit Arthur has filed is known as:
A) a direct suit.
B) a derivative suit.
C) a class action suit.
D) an unauthorized suit.

Question

Quizplus · Accepted Answer

A derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party, often an insider of the corporation, such as an executive officer or director. Arthur is suing on behalf of the corporation, which is characteristic of a derivative suit.

Arthur Is a Shareholder of Rowson, Inc