Quis Custodiat Custodium? Corporate Oversight Through Derivative Action, 2 No. 1 U. Puerto Rico Bus. L.J. 35 (2011)

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The derivative action is a valid mechanism to counterbalance the business judgment rule that protects directors from personal liability. The two most important stakeholders - the shareholder who owns a corporation and the director who leads it – often have conflicting views regarding corporate decisions. Sometimes, either side or both may have a personal interest that diverts from, or goes beyond, the best interests of the corporation. Malicious intent or gross negligence may or may not be a factor. The existence of a derivative action that requires judicial intervention to resolve conflict may be seen by the shareholder as protection of capital investment; by directors, as a managerial aid to give them room in which to exert sound business judgment; and by all, as an independent, unbiased recourse to protect a corporation’s going concern.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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