Question

Demond is a shareholder of Energy Renew Inc. When the directors fail to undertake an action to redress a wrong suffered by the firm, Demond files a suit on the firm’s behalf. Demond’s suit is

a.
a preemptive right.

b.
a shareholder’s derivative suit.

c.
unethical and illegal.

d.
the duty of a majority shareholder.

Answer 1

Demond's legal action against the directors of Energy Renew Inc. on behalf of the company is called a b)shareholder's derivative suit, which allows shareholders to step in and sue when the company's management fails to address a wrong.

Step-by-step explanation:

When Demond, a shareholder of Energy Renew Inc., takes legal action on behalf of the company because the directors fail to address a wrong done to the firm, this action is known as a shareholder's derivative suit. A shareholder's derivative suit is a legal mechanism that allows shareholders to sue on behalf of the corporation for harm caused by its directors, officers, or third parties when the company's management fails to act. This type of lawsuit benefits the company, and any damages awarded go directly to the company, not the individual shareholder filing the suit.