Shareholder Derivative Suit

Definition

A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation. Generally, a shareholder can only sue on behalf of a corporation when the corporation has a valid cause of action, but has refused to use it.  This often happens when the defendant in the suit is someone close to the company, like a director or a corporate officer.  If the suit is successful, the proceeds go to the corporation, not to the shareholder who brought the suit.  

See also