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When it comes to protecting their interests ? or the interests of the corporation ? shareholders have unique rights to take legal action. They can file suit either on behalf of the corporation itself, known as a derivative action, or on their own behalf, called a direct action.
The continuous ownership rule requires ?stockholders of Delaware corporations [to] hold shares not only at the time of the alleged wrong, but continuously thereafter throughout the litigation in order to have standing to maintain derivative claims.? A stockholder will lose standing to file suit when his or her status ...
Notable examples of recent derivative litigation are the so-called ?#metoo? lawsuits. While legal action alleging workplace harassment or misconduct is nothing new, the #metoo movement extended a company's liability beyond the concepts of workplace discrimination.
Further, a derivative claim can generally only be brought by minority shareholders, whereas any person who is a member of a company ? including majority shareholders ? can bring an unfair prejudice claim.
A contemporaneous ownership rule eliminates the possibility that a plaintiff will purchase shares, after an alleged corporate wrongdoing, for the sole purpose of threatening or initiating a strike suit.