Which of the following situations would allow a shareholder of a closely held corporation, with permission of the court, to sue on behalf of the corporation?
A) If four of the five directors, in the best interests of the corporation, voted against the fifth director, voted to end the employment contract of the fifth director, and voted not to buy his shares.
B) If the corporation had been wronged by the negligent and fraudulent acts of one of its directors, but the corporation refused to take any action against the wrongdoer.
C) If the shareholders refused to enter into a shareholder's agreement.
D) If the directors refused to declare a dividend.
E) If the directors solicited proxies from all of the shareholders.

Question

Quizplus · Accepted Answer

In situation B, a shareholder may be permitted to initiate a derivative suit on behalf of the corporation if the corporation itself has been harmed by the actions of a director and the corporation refuses to take action. This allows the shareholder to seek redress for the harm done to the corporation.

Which of the Following Situations Would Allow a Shareholder of a Closely