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Corporate Shareholder Derivative Claims

Management of a corporation’s operations is vested in a board of directors. The board of directors, in turn, owe the corporation’s shareholders a fiduciary duty of loyalty, due diligence, and care. What happens if the board of directors violates this fiduciary duty? Given that management of the corporation is vested in the board of directors, is it likely that the directors will sue themselves?

Because of this situation, the law empowers shareholders to file a suit against the board of directors. An individual shareholder, however, does not have standing to maintain a personal action for recovery of corporate funds. See West, Inc. v. Meadowgreen Trails, Inc., 913 S.W.2d 858 (Mo. App. 1995). Any injury is to the corporation, not to the individual shareholders; thus, suit must be brought derivatively. Dawson v. Dawson, 645 S.W.2d 120, 125 (Mo. App. 1982). The standing to sue flows from the ownership interest in the corporation.

In addition to this substantive distinction, Missouri Law imposes several procedural requirements on corporate shareholder claims. Under Supreme Court Rule 52, the Petition must, among other things, be verified by affidavit and brought by a shareholder who fairly represents the interests of the other shareholders.

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