What must a shareholder have to defend the company in a derivative action?

In a derivative action, a shareholder acts on behalf of the corporation to enforce a right or claim that the corporation itself has failed to pursue. For a shareholder to proceed with such an action, they are required to obtain "leave of court." This means that the court's permission must be secured before the shareholder can file the derivative suit. The rationale behind this requirement is to protect the corporation from frivolous lawsuits or actions that might be pursued solely for personal gain rather than the benefit of the corporation and its shareholders.

Leave of court ensures that the claims being advanced are legitimate and serve the interests of the corporation as a whole. It also allows the court to assess whether the shareholder has made a good faith effort to have the corporation address the issue at hand before taking legal action in its name. This process helps maintain a balance between the rights of individual shareholders and the overall integrity and interests of the corporation.

Other options such as shareholder approval, a registered attorney, or a majority vote of directors do not fulfill the specific legal requirement for initiating a derivative action, which highlights the necessity of court permission.