Shareholder Derivative Suits

AdobeStock_332552950-300x200When a company suffers financial harm due to mismanagement by a corporate officer or a board member, it is the shareholders that usually suffer the consequences. The law allows shareholders to sue for their losses when a company cannot or will not sue the officers that caused it. These are known as “derivative” suits because the shareholder’s cause of action actually derives from the company’s losses. The corporate attorneys at Structure Law Group can help you understand and enforce these rights in order to protect your financial interests as a shareholder. If you believe that funds have been mismanaged, we can help you investigate the claim and plan the legal strategy that best protects your rights. Our experienced litigators can also protect your rights in court.

Suing For Money Mismanagement on Behalf of All Investors of a Fund

When a corporate officer or member of the board engages in mismanagement, the financial consequences often affect all shareholders. Shareholders in this situation will often consolidate their claims into a single case. This saves on both legal expenses and the time it takes to get the case onto a court docket. A single plaintiff will be named to represent the entire “class” of plaintiffs, which in this case is the other shareholders who suffered the same loss. Because the shareholders are actually pursuing the company’s claim, proceeds from the lawsuit can actually go to the company. This is why many shareholder derivative suits seek remedies other than compensation. The shareholders might sue for better accounting practices, or the removal of a board member who engaged in fraudulent transitions, or some other specific relief that will prevent similar losses in the future.

Pros and Cons

As with anything in life, there are pros and cons to a shareholder derivative suit. Any legal case requires an investment of time and money. Shareholder derivative suits often involve allegations of misconduct by high-ranking corporate officers, so if it is a small corporation where the shareholders and officers are close, these allegations can ruin friendships or professional working relationships. Derivative suits are usually a last resort, to be used only after a corporation has been asked to remedy the problem and specifically decided not to do so. The case can leave a Board of Directors, management team, or even shareholders in chaos. Not all companies are able to rebuild after such upheaval. But if your rights as a shareholder have been impaired, and the company refuses to take action, you might need to take legal action to protect your own rights.

Experienced Business Lawyers For All Shareholder Claims

The experienced California business lawyer Structure Law Group can help shareholders understand their legal rights and develop a strategy for the best way to protect them. This will ensure that your financial interests are not hurt by corporate mismanagement or other misdeeds. Contact our office at (408) 441-7500 as soon as possible to schedule your consultationĀ orĀ contact us online. It is important to get legal advice as soon as possible in order to prevent the destruction of evidence and other acts that could impair your legal rights.