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Director(s) & Shareholder(s) Disputes — Attempts to Resolve

Derivative lawsuits are the primary vehicle by which a corporate shareholder may file a suit for damages against the corporate board of directors. Before pursuing such a claim, however, the law in Missouri requires that the shareholder must make a demand upon the board of directors to correct the wrongs being complained about. To be sure, the demand should may be attached to the Petition for relief, if it comes to that. The policy of this rule is that the shareholder must demonstrate that he/she has “exhausted all remedies and reasonable efforts within the corporation: that he has no other avenue of recovery.”  McLeese v. J.C. Nochols Co., 842 S.W.2d 115, 119 (Mo. Ct. App. 1992).

What happens if such an attempt is futile or impossible? Fortunately, Missouri case law has carved out an exception to the notice requirement upon a showing of facts which illustrates that demand or effort within the corporation through typical corporate channels would be unavailing. Punch v. Hipolite Co.,100 S.W.2d 878, 885 (Mo. 1936).

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