In a derivative action, what procedural step is typically required before filing, unless the demand would be futile?

• A. The shareholder plaintiff must first demand the board take action unless demand would be futile.
• B. The court oversees the litigation without any demand.
• C. The external auditor must approve the filing.
• D. The regulator must approve the filing.

Answer: (B)

The key idea here is the pre-suit demand on the board in a derivative action. Before a shareholder can file a derivative suit, the usual rule is that the shareholder must first demand that the corporation's board pursue the action. This gives the board a chance to address the issue without litigation and respects corporate governance. If that demand would be futile—such as when the directors are themselves implicated, lack independence, or are controlled by the very people who caused the harm—the requirement is excused and the derivative suit can proceed.

The other options aren’t consistent with how derivative actions are typically governed. Courts don’t automatically oversee the action without a demand, and there’s no general requirement for an external auditor or regulator to approve the filing. The focus is on giving the board a first chance to act, with the futility exception allowing the suit to go forward if demanding action would be pointless.