Fact Pattern 31-1 (Questions 32-33 apply)
Ray is a shareholder of Small Biz Company (SBC).When the direc?tors fail to undertake an action to redress a wrong suffered by SBC,Ray files a suit on the firm's behalf.
-Refer to Fact Pattern 31-1.Ray's suit is a shareholder's

Question

Quizplus · Accepted Answer

Ray's suit is a derivative suit, which is brought by a shareholder on behalf of the corporation when the directors fail to take action. The purpose of a derivative suit is to enforce a right of the corporation that has been ignored or refused by the directors. It is different from a duty-of-care or duty-of-loyalty suit, which would be brought against individual directors for breaching their duties to the corporation. The business-judgment rule is a legal principle that provides protection to directors from personal liability when they make decisions in good faith and in the best interests of the corporation.

Fact Pattern 31-1 (Questions 32-33 Apply)