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Share holders' Derivative
Actions
A shareholders' derivative action is a lawsuit brought
by a shareholder of a company, on behalf of, and for the
benefit of, the company. In essence, the shareholder is
bringing an action that the company has a right to and
should bring, but does not, due to the improper influence
an officer and/or director is exercising over the company's
affairs.
As just one example, a derivative action may be appropriate where the company's
officers and/or directors are engaged in self-dealing where the company is selling
a corporate asset to an officer and/or director of the company at a price far
below fair market value. Because the company has received less money than it
should have received for a company asset, the company has been harmed and the
company should take action to recover the value of what was lost, but wrongly
chooses not to do so. Based on this example, a plaintiff stockholder of the company
could allege that the company breached fiduciary duties (a legal concept which
usually includes ideas of "fair dealing", "good faith" and "loyalty")
owed to company stockholders and the company itself. more...
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