Question: Shareholders of Barney Slaney Inc brought a derivative suit against
Shareholders of Barney Slaney, Inc., brought a derivative suit against the corporation's board of directors for failing to supervise adequately the corporation's loan officers, who made several high-risk loans to substandard borrowers. Almost 40 percent of the high-risk borrowers defaulted on the loans, resulting in a loss of $55 million to Barney Slaney. The directors asked the corporation to advance to them the cost of legal fees for defending themselves against the charges. Under what conditions may the corporation make advances of legal fees to the directors?
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