derivative action


derivative action
derivative action n: a suit brought by a shareholder on behalf of a corporation or by a member on behalf of an association to assert a cause of action usu. against an officer which the corporation or association has itself failed to assert for its injuries – called also derivative suit, shareholder's derivative suit; compare direct action 2
◇ A shareholder or member bringing a derivative action must describe in the complaint attempts to obtain action from the corporate directors or association authorities, or from other shareholders or members, and the reasons these attempts failed. The plaintiff must fairly and adequately represent the other similarly situated shareholders or members, and the action may not be collusive. Federal Rule of Civil Procedure 23.1 governs derivative actions brought in federal court.

Merriam-Webster’s Dictionary of Law. . 1996.

derivative action
n.
(1) A lawsuit brought on behalf of a corporation by a shareholder.
(2) A cause of action founded on an injury to another person, such as an action for loss of consortium brought by a wife after her husband is injured.

The Essential Law Dictionary. — Sphinx Publishing, An imprint of Sourcebooks, Inc. . 2008.


derivative action
A lawsuit brought by a shareholder against the corporation's directors, other shareholders of the corporation, or a third party for failure of management or fraud. The suing shareholder sues on behalf of the corporation (usually because the directors are failing to exercise their authority for the benefit of the company), and any proceeds of a successful action are awarded to the corporation and not to the suing shareholder.
Category: Business, LLCs & Corporations → LLCs, Corporations, Partnerships, etc.

Nolo’s Plain-English Law Dictionary. . 2009.


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.

Dictionary from West's Encyclopedia of American Law. 2005.


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.

Short Dictionary of (mostly American) Legal Terms and Abbreviations.

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.

Law dictionary. . 2013.