The Andres Lopez Law Firm

What is a shareholder derivative lawsuit?

Like individual Florida residents, corporations in this state have the ability both to sue and to be named as defendants in lawsuits. This means that if an individual, including a corporate officer, director or employee, does something to harm the corporation, the corporation can pursue available legal remedies. The corporation may even be able to demand compensation for its financial losses.

However, sometimes the person who harmed a corporation is in a position of power within the business. For example, a chief executive officer may have stolen money from the corporation, or a member of the board of directors may have engaged in some self-dealing that hurt the interests of the corporation.

Those who ultimately invest their money in the corporation deserve some justice under these sorts of circumstances, since it is ultimately their pocketbooks that wind up getting hurt. However, the perpetrator may have enough influence to effectively veto any decision on the part of the corporation's leadership to pursue business litigation.

In this sort of situation, a shareholder derivative lawsuit may be a viable option. As the name implies, an individual holder of stock may bring a lawsuit when the corporation could have done so yet passed on the opportunity, perhaps because of the influence of those who are in the wrong.

In a shareholder derivative lawsuit, the plaintiff investor brings the suit instead of the corporation, so the corporation will receive any compensation that the plaintiff wins. However, especially if the plaintiff has a lot invested in the corporation, a win will indirectly benefit him or her as well. Shareholders who feel that a derivate suit may be the right option for them should consider speaking to a business litigation attorney.

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