Business Associations, Pages 327–328

Charlestown Boot & Shoe Co. v. Dunsmore

Supreme Court of New Hampshire, 1880


The plaintiff shareholders voted to have a committee act with the defendant directors to close up the corporations affairs and chose Osgood for such committee. Osgood tendered his services, but defendants refused to work with him and contracted new, larger debts than legally allowed. Because of their neglect and refusal to listen to Osgood, they lost over $45,000.


Could plaintiffs compel the defendant directors to act with Osgood?


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"The business of every such corporation shall be managed by the directors thereof, subject to the by-laws and votes of the corporation, and under their direction by such officers and agents as shall be duly appointed by the directors or by the corporation."


The statute says that directors are in charge of a corporation's business. Shareholders are not authorized to join another officer with the directors, not compel them to act with one who is not a director. Directors are bound to use ordinary care and are answerable for ordinary negligence however.


No, the vote choosing Osgood to act with the defendant directors was inoperative and void. Demurrer sustained.