Derivative Actions

Question 1

Derivative Actions

Answer 1

Bringing lawsuit on behalf of corporation

Question 2

generally shareholders have no

Answer 2

separate and independent right of action for injuries suffered by the corporation which merely result in the depreciation of the value of their stock.

Question 3

Representative

Answer 3

Can bring suit

Question 4

Derivsative Procedure

Answer 4

Make demand
Board refers to committee
Committe and experts give opinion
Board rejects/accepts demand
If reject sue,  corp still plainiff

Question 5

derivative must get

Answer 5

excused

Question 6

Standard of boards rejection

Answer 6

Arason Standard

Question 7

Arason Standard

Answer 7

Reasonable doubt that the board can make an independent decision

Question 8

What raised doubt?

Answer 8

F. Maj of board has a material financial or familial interest
G. Maj of board is dominated or controlled by the alleged wrongdoer
H. Underlying transaction isn’t the product of a valid exercise of its business judgement.

Question 9

shareholder has to show it was wrongful

Answer 9

evaluate via Business judgement rule

Question 10

Why demand requirement

Answer 10

i. Authority of directors
ii. Chance to investigate
iii. Chance to take remedial measures
iv. Assures corporate control of action
v. Avoids waste of assets
vi. Protects democratic values

Question 11

Universal demand states

Answer 11

i. Follow Model business corp act
ii. Shareholders must make demand, even if futile
iii. Making demand doesn’t concede it was necessary
iv. Corp can move to dismiss
v. Inquiry is not whether demand is excused, to whether board properly rejected.
F. Sub standards are similar

Question 12

Delaware demand

Answer 12

i. Demand required unless futile
ii. Making demand concedes is not futile
F. Battle is over whether demand was required
G. Reasonably doubt as to whether board was impartial