What is a derivative lawsuit and when is this an effective strategy to resolve shareholder disputes? Are you concerned about the direction of a corporation in which you own a minority position? Are the majority shareholders, executives and Directors leading the business in the wrong direction or making decisions which adversely affect the value of the company and your investment? You may not have the voting or veto power as a minority shareholder to adequately influence the Directors or executives decision, but there is a legal option to protect your position and the interests of the corporation. It’s called a “derivative lawsuit.” What is a derivative lawsuit going to accomplish for you and other minority shareholders who may share your position?
It is not possible in most circumstances under California to bring a lawsuit for damages against the Directors or executives of the corporation based upon the idea their mismanagement has decreased the value of the corporation and thereby the value of your stock. In a derivative lawsuit our attorneys file a lawsuit against the Directors, executives and or managers on behalf of the corporation itself, to remedy the “injury” they have incurred upon the corporation which the corporation has been unable to pursue on its own. A derivative lawsuit may also seek to prevent a decision or action by the Board of Directors which might cause irreparable harm to the corporation or to recover damages for breach of fiduciary duty by individual executives, Directors or officers of the corporation.
The “damages” recovered in the derivative lawsuit belong to the corporation itself, not the minority interest(s) who brought the lawsuit. This should increase the value of the corporation, prevent future wrongdoing and thereby increase the overall value of the shareholder’s investment. What is a derivative lawsuit going to cost? Generally speaking the legal fees associated with a derivative lawsuit are often paid out of the financial “benefit” the corporation received as a result of the lawsuit. We invite you to contact us or call 866-631-3470 for a free consultation and to learn more about questions such as “What is a derivative lawsuit?” and “How can a derivative lawsuit protect our minority interests in the corporation?”
