If a corporation were wronged by negligent and fraudulent acts committed by one of its directors and consequently suffered a $45 000 loss,and if the board of directors will not take any action on behalf of the corporation against the wrongdoer,which of the following would be true?
A)A representative (derivative)action allows a shareholder to commence an action on behalf of the corporation.
B)If the company failed to commence an action through its authorized agents (e.g.,its directors),no action could be taken,because a corporation is merely a legal concept and must act through its authorized agents.
C)The shareholders could proceed under the "dissent" procedure and force the corporation to pay them a fair market value for their shares.
D)The shareholders could sue the corporation for oppression.
E)The shareholders could force the directors to start the action on the basis of their "pre-emptive right."

Question

Quizplus · Accepted Answer

A representative (derivative) action allows a shareholder to commence an action on behalf of the corporation when the board of directors refuses to take action. This allows the corporation to recover the loss caused by the negligent and fraudulent acts of the director. Option B is incorrect because a corporation can act through its shareholders in certain circumstances. Option C, D, and E are also incorrect because they are not relevant to the given scenario.

If a Corporation Were Wronged by Negligent and Fraudulent Acts