What is a shareholder class action?

A shareholder class action is a type of legal action taken by shareholders of a Delaware corporation. It is a type of lawsuit in which a group of shareholders—representing the company’s owners—suing the company itself, usually over allegations of mismanagement or fraud. The lawsuit is usually issued by a single shareholder, but other shareholders may join the action if they have suffered damages as a result of the harm the company has allegedly done. The purpose of a shareholder class action is to stop the wrongdoings of the company and to seek financial compensation for financial losses the shareholders may have suffered. In order to initiate a shareholder class action, the class must be certified by the court. To do so, the court must find that the class is sufficiently numerous, that the issues common to the class are sufficiently substantial, and that the class is sufficiently cohesive. If the court certifies the class, it will allow all members of the class to pursue the lawsuit as a group. Once certified, the shareholders—as a class—will have the ability to pursue damages from the company, including court-ordered restitution for any financial losses. In addition, the company may be required to pay the shareholders’ legal fees. Ultimately, the goal of a shareholder class action is to hold the company accountable, and to help the shareholders recover their losses.

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What is a shareholder class action?

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