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?

Question

Quizplus · Accepted Answer

The derivative-action provision allows shareholders to bring legal action against the directors or officers of a corporation when they have breached their fiduciary duties to the company. This includes cases where a director has diverted a corporate opportunity for their personal benefit, which is what Smith did in this scenario. The fact that the other directors are close friends of Smith and have not taken action against him does not prevent the shareholder from using this provision to seek relief.

Smith, Director of ABC Ltd