What is a shareholder derivative action?

A shareholder derivative action is a legal claim within corporate law in Washington that allows shareholders to file lawsuits on behalf of a company against any wrongdoers. This type of action allows shareholders to hold certain people or entities accountable for their actions that may be harmful to the company. This type of lawsuit is usually filed when the company itself is unable or unwilling to take action against any wrongdoers. In a shareholder derivative action, the shareholder(s) acts on behalf of the company itself to pursue any legal claims. This action occurs when the responsible individuals are either officers and directors of the company, or outsiders dealing with the company. These lawsuits are generally initiated by shareholders with a financial interest in the company and can be brought against anyone who has caused harm to the company. The shareholder derivative action is intended to prevent wrongful acts and preserve the company’s assets which in turn benefits the shareholders. Damages obtained in the lawsuit would then be distributed to shareholders as compensation. Shareholder derivative actions are a legal tool allowing shareholders to protect their investments. They, however, require a thorough understanding of the legal system and business principles, as well as a strong commitment to the financial interests of the company.

Related FAQs

What is the difference between a corporation and a partnership?
What are the taxation requirements for corporations?
What are the consumer laws and how do they affect corporations?
What is a joint venture?
What are the disadvantages of forming a LLC?
What is the role of corporate executives?
What is corporate law?
What are the benefits of forming a corporation?
What is the corporate disclosure rules and regulations?
What is the purpose of corporate social responsibility?

What is a shareholder derivative action?

Related FAQs

Related Blog Posts