Shareholders Lawsuit

Question 1

Lawsuits by shareholders against the corporation

Answer 1

• a shareholder may file an action to establish that the acts of the directors are illegal, fraudulent, or willfully unfair and oppressive to either the corporation (derivative suits) or the shareholder (direct suits)

Question 2

Direct suits

Answer 2

• a direct suit is appropriate when the wrong done amounts to a breach of duty owed to the individual personally.

Question 3

Derivative suits

Answer 3

• a derivative suit is appropriate when the injruy is acaused to the corporation and a shareholder is trying to enforce the corporations’ rights
• a shareholder must meet 3 requirements: standing, adequacy, and demand (unless futile)
• recovery only goes to corporation

Question 4

Piercing the Coprorate Veil

Answer 4

• Generally, the law treats corporation as a entity separate from its shareholders.
• However, courts will disregard the limited liability and hold a shareholder personally liable for corporate debt.
• plaintiff must show that shareholders abused the privilege of incorporating and fiarness requires holding them liable.