Questions re first mid-term

1- Did Jack own 100% of the shares and was he the sole member when he decided to sell the SSI stock, or he did sell the stock while he owned 87% and without going back to the BOD?

2- Does a derivative suit on behalf of the company include causes of actions that arises before the shareholder bought his shares in the company? 


  1. I’m not sure why students are asking about the timing of the sale of the shares and who sold the shares to the new shareholders. He is a shareholder and a bunch of other people are shareholders. If you think the timing of the sales of the shares matters, you have to say why and explain what the result would be first if he sold his own shares and second if the corp sold new shares. For whatever it’s worth; a sale of shares by the corp must be approved by the BOD (therefore what is the consequences if the BOD does not approve?). A sale by a shareholder of his personal shares does not have to be approved by the corp or anyone else – forgetting securities laws. These are not issues in this question. If you think they are, by all means explain why. I will listen.
  2. The answer to this is no. But don’t worry about whether the derivative suit was procedurally proper. I should have said that in the question, although again it could be answered easily; “if she didn’t own shares when the bad things happened, she cannot be the plaintiff.”

Note: I have been thinking about this as I’m writing the response. The question says S wants her investment back. That’s a good question when we get to securities laws. Can she get it back from Jack? Your answer should say “yes, if ——-.” “No, if ———.” Can she get it back from the corp? Same.

But the question says (you forced me to look at the question): Suzie files a derivative suit against Jack and the BOD. It doesn’t ask you if she can get her investment back directly from Jack.

Good questions.

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