Fact Pattern 39-1A
Ray is a shareholder of Small Biz Company . 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 39-1A. Ray's suit is a shareholder's

Question

Fact Pattern 39-1A 
Ray is a shareholder of Small Biz Company . 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 39-1A. Ray's suit is a shareholder's

Quizplus · Accepted Answer

Ray's suit is a derivative suit, as he is filing a lawsuit on behalf of the firm to redress a wrong suffered by it. Shareholders can file derivative suits when the directors fail to take action in the company's best interest. The business-judgment rule, duty-of-care, and duty-of-loyalty relate to the conduct of directors and officers themselves, rather than the actions of a shareholder.