What is a shareholder derivative suit?
A shareholder derivative suit is a lawsuit brought by a shareholder of a company, on behalf of the company, to enforce a cause of action against a third party, who is typically an officer or director. Derivative actions are often brought when a company is not enforcing rights it possesses against third parties. Generally, this is because the officers and directors of a corporation do not want to bring suit against a colleague, even if such a lawsuit is appropriate.
