If a corporation had been wronged by negligent and fraudulent acts of one of its directors and consequently suffered a $45,000 loss, and the board of directors would not take any action on behalf of the corporation against the wrongdoer, which of the following is true?

Question

Quizplus · Accepted Answer

A derivative action allows a shareholder to commence an action on behalf of the corporation when the board of directors fails to take action against the wrongdoer. This is the appropriate course of action for the corporation in this scenario. Option A is incorrect because a pre-emptive right allows a shareholder to maintain their percentage ownership in the corporation by purchasing additional shares before a new issue is made available to the general public, it does not pertain to legal action against wrongdoers. Option B is incorrect because the dissent procedure applies when a shareholder disagrees with a fundamental change to the corporation, not legal action against a director. Option D is incorrect because a corporation can take legal action through its authorized agents (such as the board of directors), but if they fail to do so, a shareholder can initiate a derivative action. Option E is incorrect because oppression is a concept related to the abuse of power by a dominant shareholder, not an appropriate course of action in response to fraudulent acts by a director.

If a Corporation Had Been Wronged by Negligent and Fraudulent