Smith,director of ABC Ltd.,intercepted a corporate opportunity for his own benefit and thereby caused the corporation to miss a $45 000 profit.A shareholder urged the board of directors to take action against him.The other directors,all close friends of Smith from school days,did not take any action against him,although they did voice their dissatisfaction with his move.Which of the following provisions would aid the shareholder?
A)dissent procedure
B)representative action (derivative-action)provision
C)indoor-management rule
D)pre-emptive right provision
E)relief-from-oppression provision

Question

Quizplus · Accepted Answer

The representative action (derivative-action) provision allows shareholders to bring an action on behalf of the corporation against a director who has breached their duties and caused harm to the corporation. In this case, the shareholder could bring an action against Smith on behalf of ABC Ltd. for intercepting a corporate opportunity and causing the corporation to miss a profit. The fact that the other directors did not take action against Smith further supports the need for a derivative action.