Derivative Action


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Derivative Action

A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do.

A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the corporation to seek redress of legal grievances through the courts. The procedure to be followed in such an action is governed by the rules of federal Civil Procedure and state provisions, where applicable.

derivative action

n. a lawsuit brought by a corporation shareholder against the directors, management and/or other shareholders of the corporation, for a failure by management. In effect, the suing shareholder claims to be acting on behalf of the corporation, because the directors and management are failing to exercise their authority for the benefit of the company and all of its shareholders. This type of suit often arises when there is fraud, mismanagement, self-dealing and/or dishonesty which are being ignored by officers and the Board of Directors of a corporation. (See: corporation)

References in periodicals archive ?
On April 10, 2019, ImmunoCellular (the 'Company'), in its capacity as a nominal defendant, and certain current and former directors and officers of the Company (the 'Individual Defendants') (collectively, 'Defendants') entered into a Stipulation of Settlement in the above-captioned action filed derivatively on behalf of ImmunoCellular, in the Superior Court of the State of California, County of Los Angeles (the 'Court') against the Individual Defendants (the 'Derivative Action').
derivative action on behalf of the subsidiary may only be maintained by
In a shareholder derivative action under UK law, the court also has
Ripley-light: Waterston Covenant labours in the shadow of earlier films and has been crudely bolted together by screenwriters John Logan and Dante Harper with derivative action set-pieces that give birth to a new hybrid of extraterrestrial nasty - the neomorph - with translucent milky skin and a gait more akin to humans.
For instance, Rule 23.1 of the Federal Rules of Civil Procedure empowers "[...] one or more shareholders [...] to bring a derivative action to enforce a right" of "the corporation" (1).
Shareholders of corporations who have experienced a cybersecurity breach oftentimes file a shareholder derivative action. In a derivative action, a shareholder brings suit on behalf of the corporation against third parties, typically "insiders" such as executive officers or board members, asserting these individuals breached their duties of care to the corporation.
Nevertheless, given that the minority shareholders did not seek leave to commence a derivative action and requested only a personal remedy, their complaint was properly located within the oppression action.
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By law, C generally has no standing to directly sue the other shareholders, but he does have a 'derivative right' to ask the company to sue them."The problem, Pachman added, is that sometimes derivative actions are nothing more than nuisance suits "undertaken only to obtain a settlement from the company on behalf of the shareholder bringing the action; in fact, there's no benefit to the company itself." This amendment "provides procedures to facilitate the dismissal of spurious actions," he noted.
Derivative actions are lawsuits brought by shareholders, on behalf of a corporation, against a third partyin this case, against Sinova's other two co-owners.
He advises clients on shareholder derivative actions involving securities laws and class action suits, as well as matters related to breach of fiduciary duty, corporate governance disputes, lender liability, creditors rights, business torts and action plans to minimize financial services litigation risk.