shareholder derivative action

A shareholder derivative action is a lawsuit filed by a shareholder on behalf of a corporation to address wrongful acts by its directors or officers. If the company’s management breaches their duties, such as acting fraudulently or negligently, shareholders can step in to seek accountability and recover damages for the company. Essentially, it allows shareholders to act as representatives to protect the corporation’s interests when those responsible fail to do so. This legal action helps ensure that company leaders are held accountable and that the corporation’s assets and reputation are defended.