A special litigation committee whose purpose is to decide whether to sue should consist of:
A)directors who were directors at the time the wrong occurred.
B)directors who are not defendants in the derivative suit.
C)directors who are interested in the challenged action.
D)directors who are not independent of the defendant directors.

Question

Quizplus · Accepted Answer

In an attempt to ensure the application of the business judgment rule in demand refusal and demand futility situations,interested directors have tried to isolate themselves from the decision whether to sue by creating a special committee of the board,called a shareholder or special litigation committee (SLC) (or independent investigation committee)whose purpose is to decide whether to sue.The SLC should consist of directors who are not defendants in the derivative suit,are not interested in the challenged action,are independent of the defendant directors,and,if possible,were not directors at the time the wrong occurred.

A Special Litigation Committee Whose Purpose Is to Decide Whether