Derivative Action in United States

Practical Information

Note: Some of this information was last updated in 1982

A suit brought by a shareholder on behalf of the corporation (in U.S. law) to compel management to act properly for the protection of the corporation’s rights. The relief, if granted, is in favor of the corporation. The suit may involve restitution from the directors who have misappropriated assets, or who, by their negligence (in U.S. law) have brought a loss upon the corporation. Before a stockholder may maintain a derivative suit, he or she must make a demand to the board of directors (in U.S. law) that they act properly and redress any wrongs, and the directors must refuse to do so. See also representative action (in U.S. law).

(Revised by Ann De Vries)

What is Derivative Action?

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