Opinion ID: 1238867
Heading Depth: 4
Heading Rank: 1

Heading: Permitting a Direct Action in this Case Is the Only Way to Provide an Adequate Remedy for the Share holders Who Were Excluded from the Financial Security Plan

Text: If a direct action were not permitted in this case, the possible defendants in a derivative action would be (1) the shareholders who received payments under the financial security plan, and (2) the corporation's officers and directors. For the following reasons, it is unlikely that a derivative suit against either or both of these groups would be an adequate remedy for the plaintiffs. First, the corporation may not be entitled to any damages from the shareholders who received payments under the financial security plan. Under AS 10.06.378, liability is imposed on shareholders who receive unlawful dividends only when they have accepted payments knowing that the distribution was in violation of certain legal limits. It is unlikely that the beneficiaries of the financial security plan knew that the payments violated the law. This suggests that the beneficiaries of the financial security plan would not be liable to the corporation. Second, it is unlikely that any damages collected from the responsible directors and officers would approximate the sum of payments made under the plan. [4]