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LSDefine

Simple English definitions for legal terms

shareholder's derivative action

Read a random definition: agrarian

A quick definition of shareholder's derivative action:

A shareholder's derivative action is when a shareholder or group of shareholders sue a corporation's directors, officers, or other third parties who have breached their duties. The lawsuit is brought on behalf of the corporation, not the shareholder, and any damages awarded go to the corporation. Shareholders can only sue if the corporation has a valid cause of action but has refused to use it. The purpose of the lawsuit is to protect the interests of the corporation. Shareholders must meet certain requirements to bring a derivative action, including being a shareholder at the time of the act or omission complained about and making a demand in writing requiring the corporation to take suitable action before the lawsuit. The lawsuit can be dismissed if most of the qualified directors determine in good faith that it is not in the best interests of the corporation.

A more thorough explanation:

A shareholder's derivative action is a lawsuit brought by a shareholder or group of shareholders on behalf of a corporation against its directors, officers, or other third parties who breach their duties. The purpose of the suit is to protect the interests of the corporation, not the individual shareholder. The shareholder can only sue when the corporation has a valid cause of action but has refused to use it. The damages awarded in the suit go to the corporation, not the shareholder. The shareholder may ask for a reasonable cost paid for litigation.

Example 1: A corporation's board of directors makes false statements that cause the corporation to suffer a loss in share value. The corporation refuses to take action against the board of directors. A shareholder can bring a derivative action on behalf of the corporation to hold the board of directors accountable for their breach of duty.

Example 2: A corporation's CEO embezzles funds from the corporation. The corporation takes action against the CEO, but the damages awarded are not enough to fully compensate the corporation for its losses. A shareholder can bring a derivative action on behalf of the corporation to recover additional damages from the CEO.

These examples illustrate how a shareholder's derivative action is used to protect the interests of the corporation when the corporation has a valid cause of action but has refused to use it.

shareholder derivative suit | shareholders' agreement

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HopefullyInLawSchool
16:06
it means you will not be rejected today and may be accepted or WL in the future
Just got my Michigan rejection
BookwormBroker
16:10
same
RoaldDahl
16:10
@HopefullyInLawSchool: what if i already got rejected. does it mean anything
HopefullyInLawSchool
16:12
@RoaldDahl: Likely not however it could mean nothing
RoaldDahl
16:15
So if it means nothing does that mean something?
HopefullyInLawSchool
16:17
Possibly
RoaldDahl
16:26
Cool
RoaldDahl
16:26
thank you!!!! i hope it means something
pinkandblue
16:31
fart
IrishDinosaur
16:36
Mich R gang lesgooo
Did anyone else get that random get to know nova email?
HopefullyInLawSchool
17:21
Ya it was sent to all YM applicants
starfishies
17:37
Anyone get the NDLS email inviting you to apply for something even though they haven’t made a decision on your app yet
17:38
Better yet I got the email and I was rejected last month
starfishies
17:38
Wtf
starfishies
17:39
and the deadline is in like a week what is this
any cardozo movement?
BatmanBeyond
18:01
Sent a LOCI via portal, but I'm wondering if email would have gotten me a swifter response
BatmanBeyond
18:02
This whole hold/wait-list/reserve system is a headache
loci already?
BatmanBeyond
18:09
If the odds are like 1-2% I don't think it matters much by the numbers
12:11
I got the same NDLS email
OrangeThing
12:18
I think the user profiles are broken
19:29
Any word out of Notre Dame?
19:29
Only the invitation to apply for LSE
19:29
Anyone received a decision from NDLS?
19:50
when did u guys apply that just heard from umich? they havent even glanced at my app yet
0:30
how am i supposed to spy on people when profile links are broken?
Right. Broken links smh
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