Answer :
Final answer:
Before filing a derivative action lawsuit, shareholders must first make a formal demand on the board of directors and allow sufficient time for correction.
Explanation:
The statement is true.
Before shareholders of a corporation can file a derivative action lawsuit, they are generally required to make a formal demand on the board of directors to take corrective action and allow sufficient time for correction. This is known as the demand requirement.
The demand requirement serves as a safeguard to ensure that shareholders exhaust all internal corporate remedies before resorting to litigation. It gives the board of directors an opportunity to address the alleged wrongdoing and potentially avoid the costs and disruptions of a lawsuit.
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