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Derivative Actions by Shareholders

April 15, 2017 • admin

“Derivative Actions by Shareholders”23.1

When the company™s right is violated,
the shareholders, as the ultimate owner of company™s interests, will inevitably
receive damage. But as the company is the independent legal entity, the
shareholders generally have no right to decide whether or not pursue the legal
liability of infringer. Due to the separation of ownership from management, the
company daily management power is mostly dominated by managers, directors and
other senior management personnel (Arnold and Margaret referred to in this
case). The shareholders, especially minority shareholders, are weak for the
supervision of the company. When infringers are third one, who have nothing to
do with the company, the decisions made by the board are usually reasonable,
however, when the infringers are members of the board, senior staff who control
the company (Beta), the interests of the minority shareholders usually suffer
from damage

Derivative Actions by
Shareholders, entitled by Federal Rule of Civil Procedure 23.1, states that a
plaintiff have to be a shareholder or member at the time of the transaction in
order to bring a derivative suit. Besides, under New York Business Corporation
Law ?§?626(b), in this case, Arnold, as one of the directors and the majority
shareholder of Beta, who held 85 shares of common stock out of a total of 100
shares issued and outstanding, infringed the company™s interests for his own
good without the other director Tom™ admission. Therefore, the minority
shareholder Diana, has the possibility to prevail against Arnold. The court
should forbid Arnold™s order about purchasing the real estate from the
Commercial Property and warn Arnold with an appropriate economic punishments.


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