A shareholder sought to sue a management company in the company’s name because he contended that the agreement with it was unduly extended and later ratified by the company's board of directors. The shareholder did not contact the board of directors before filing the claim.
The Court held that the shareholder may sue on behalf of the company. When there is concern that the company's institutions, such as its board of directors, are being managed in a manner that is not in line with the company's interests, a shareholder has the right to sue on its behalf as long as it has a basis and the claim’s management is for the company's benefit, and in certain cases even without a prior application to the board of directors. Here, the fact that the board of directors approved the agreement as such is an objection to filing a claim and therefore the shareholder has the right to sue on the company’s behalf without first approaching the board of directors.