A derivative lawsuit is when a shareholder sues directors on behalf of the corporation for some impropriety. It is termed a “derivative” lawsuit because the lawsuit arises out of the individual shareholder’s ownership of shares in the company. Most types of derivative lawsuits allege mismanagement against the directors or other specific instances of fiduciary misconduct…
Legal Articles
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,…