Future Business Leaders of America (FBLA) Business Law Practice Exam

What type of lawsuit allows a shareholder to sue a corporation directly for denial of rights?

1. Direct suit

2. Derivative suit

3. Class action lawsuit

4. Injunction

The correct answer is: Direct suit

A direct suit is the appropriate type of lawsuit that allows a shareholder to sue a corporation directly for the denial of rights. In situations where a shareholder feels their personal rights are being infringed upon, such as the right to vote or receive dividends, they can file a direct suit. This legal action is meant to address individual grievances rather than issues affecting the corporation as a whole. In contrast, a derivative suit involves a shareholder suing on behalf of the corporation to address wrongs against the corporation itself, typically in cases where the management has failed to act in the best interest of the corporation. Class action lawsuits pertain to cases where a group of individuals with a common interest files a suit together, often related to consumer rights or wider corporate misconduct. An injunction is a court order that requires a party to do or cease doing specific actions, and while it can be a remedy requested in different lawsuits, it does not represent the law suit type itself.