March 03, 2014 Articles

Courses of Action after Allegations of Misconduct

What to do when a board of directors asks you to hatch a plan to handle a derivative action.

By Frederick H. Riesmeyer II, Kendra D. Hanson, Andrew M. Zeitlin, and Alison P. Baker

You represent a corporation when one member of the four-person board of directors comes to you with a new lawsuit filed against all four directors by a minority shareholder, alleging breach of fiduciary duty, fraud, and/or another business tort. The board asks you to put together a plan for handling the derivative action and to outline strategies available to the board. Where do you start? What are your options?

This article examines the options available to a board when confronted with derivative actions, the duties and responsibilities of the board in responding to such actions, and how to determine a proper course of action.

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