A derivative action is a legal proceeding brought by a shareholder on behalf of a corporation to enforce the corporation’s rights when the corporation itself fails to do so. It typically arises when corporate officers or directors are alleged to have breached their fiduciary duties, committed fraud, or engaged in other misconduct that harms the corporation. Shareholders may bring a derivative action to hold those responsible accountable and recover damages or other remedies on behalf of the corporation. The outcome of the derivative action usually benefits the corporation as a whole rather than individual shareholders.
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This glossary post was last updated: 29th March, 2024.
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