Glossary: Shareholders' Derivative Suit

Shareholders' Derivative Suit

Shareholders' Derivative Suit or Derivative Suit - A Shareholders' Derivative Suit is a lawsuit brought by a shareholder on behalf of and in the name of a corporation to protect the corporation from wrongs committed against it by one or more of its officers, directors, or controlling shareholders. Damages awarded at trial or negotiated in a settlement of a derivative suit are paid to the corporation, not to the shareholder. All derivative suit settlements must be approved by the court hearing the case. The object is to remedy damages incurred by the corporation as the result of breach of fiduciary duty by corporate officers, directors or controlling shareholders.

Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.

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