What is a shareholder derivative suit?
1. What is a shareholder derivative suit? It is a lawsuit brought by a shareholder or group of shareholders to assert a claim belonging to the company against, most often, directors and officers. They may, although rarely, be asserted against third parties.
Who files a derivative lawsuit?
A shareholder derivative lawsuit is a legal action filed by an individual shareholder, in the name of the company, to redress wrongs or harms to the company that the Board of Directors or Officers will not address themselves.
What is a verified shareholder derivative complaint?
Verified Shareholder Derivative Complaint means the Verified Shareholder Derivative Complaint For Violations of the Securities Exchange Act of 1934, Breach of Fiduciary Duty, Waste of Corporate Assets, and Unjust Enrichment filed by Peter Derrer on or about April 12, 2010.
Who is the defendant in a derivative suit?
On the plaintiff’s side are two parties – the complaining shareholder and the corporation itself. On the defendant’s side are management and the corporation again – this time as a “nominal” defendant (a defendant as a formality only).
What are the requirements before a derivative suit can be filed?
First, the suit should be brought in the name and on behalf of the corporation for a wrong done on the corporation and not one done to the stockholder. It is a suit by a stockholder to enforce a corporate cause of action (De Leon, ibid., p. 578). Second, there must be demand upon the board to redress the wrong.
Can a shareholder sue the company?
A corporate shareholder can sue a corporation’s officers or board of directors either through a direct lawsuit or indirectly through a derivative lawsuit.
When Can shareholders sue a corporation directly?
A shareholder may only file suit on behalf of a corporation after they have attempted to resolve the issue with the board of directors and if the corporation has a valid cause of action, but refuses to sue.
What happens when shareholders sue a company?
In a direct lawsuit, the prevailing shareholder will be entitled to any remedies or damages received. In contrast, in a successful derivative lawsuit, the corporation will be the one to receive any damages. Such damages will then be distributed towards the prevailing corporation’s assets.
Can a director bring a derivative action?
What is the process for shareholders bringing a derivative action? Shareholder begin the derivative action process by making a request to the board of directors to bring a legal action against the alleged wrongdoer. This is called making demand on the board.
What is derivative suit in law?
A derivative suit is defined as one brought by one or more stockholders in the name and on behalf of the corporation to redress wrongs committed against it whenever its officials refuse to sue, or are the ones to be sued, or hold control of the corporation (De Leon, The Corporation Code, p. 577).