Dan Is a Director of a Corporation, and Without Disclosing

Essay

Dan is a director of a corporation, and without disclosing his conflict of interest, entered into a contract to supply the corporation with widgets. The contract was made in the name of his mother so that the corporation would not know that Dan was involved. Pat is a minority shareholder in the corporation, has found out about the conflict, and intends to bring a derivative action against Dan. Explain what a derivative action is. Why is a derivative action appropriate in the circumstances? What must Pat show in order to bring a derivative action? What remedy might a court award?