101 South Hanley, Suite 1280 Clayton, MO 63105
314.283.8930; henry@elsterlaw.com

Nonprofit Corporation Derivative Actions

A corporate derivative action is one in which a shareholder or member sues on behalf of the corporation and against a director — usually for mismanagement, breach of fiduciary duty and/or some other malfeasance. The reasoning is that the injury is to the corporation and that the corporation, not its members/shareholders, must bring the suit to redress the wrong. Normally, the directors/officers are authorized to bring a suit, but there is a natural conflict in that they will not bring a suit by the corporation against themselves.

For for-corporation, there is no minimum amount of shares required to bring a derivative action. Rule 52.09; Dawson v. Dawson, 645 S.W.2d 120, 128 (Mo. Ct. App. 1982). A small, minority owner of one (1) share in a corporation with ten-thousand (10,000) shares can bring a shareholder derivative action against the corporation’s directors for breach of fiduciary duty.

Things differ significantly with a member in a non-profit corporation. To bring a derivative suit or request removal by a Court with a non-profit corporation, the lesser of fifty (50) members and/or those having ten percent (10%) or more of the voting power must bring the suit. Sections 355.356, 355.221, RSMo. McMahon v. Geldersma, 317 S.W.3d 700, 704 (Mo. Ct. App. 2010).