stockholders' derivative action

Cosmetic Skin Care Industry

2011 = $100,000,000,000 in profits

1% = $1,000,000,000 of profits

Objection by some shareholders

Derivative actionUltra Vires

Ultra vires is Latin for “beyond the powers of.”

Derivative actionUltra Vires

NCGS § 55-2-02(b)(2)(2001)

Deviation: a change from a customary or agreed upon course of action.

“In name only.”

NOMINAL

…unless where a stockholder alleges demand upon and refusal by the

corporation to institute the action to redress the wrong.

Baker v. Data Dynamics Inc.,561 F. Supp. 1161 (1983)

Norman v. Nash Johnson and Sons’ Farms, Inc., 537 S.E. 248, (2000)

The corporation The stockholder

WHO SUFFERED THE ALLEGED HARM?

Cabaniss v. Deutsche Bank Securities,

611 S.E. 2d 878 (2005)

Aubin v. Susi, 560 S.E. 2d 875 (2002); Outen v. Mical, 454 S.E. 2d 883 (1995)

…discontinuance, compromise, or settlement of action.

Alford v. Shaw, 358 S.E. 2d 323 (1987)

Brinson v. Mills Supply Co., 14 S.E. 2d 505 (1941)

Lee v. Wake County, 598 S.E. 2d 427 (2004)

Victor v. Chadwick Mfg. Co., 61 S.E. 653 (1908)

Snow Hill Banking & Trust Co. v. D.J. Odom Drug Co., 125 S.E. 394 (1924)

Kerr v. Hicks, 70 S.E. 486 (1911)

NO!

North Carolina Attorney General Roy A. Cooper

NCGS § 55-14-30

In conclusion…

Inform the stockholder to get the majority to amend the articles of incorporation to broaden Daggett Industries’ purpose.

NCGS 55-10-03