[Your Name] [Your Address] [City, State, ZIP Code] [Email Address] [Phone Number] [Date] [Recipient's Name] [Recipient's Position] [Recipient's Address] [City, State, ZIP Code] Subject: Motion to Dismiss on Shareholder Derivative Claims Dear [Recipient's Name], I hope this letter finds you well. I am writing to you as a shareholder of [Company Name] regarding a motion to dismiss the shareholder derivative claims against the company. In light of recent developments and in accordance with Puerto Rico corporate laws, I believe it is necessary to address these claims promptly and efficiently to protect the best interests of the company and its stakeholders. As a shareholder, I acknowledge the importance of fostering a transparent, accountable, and well-governed corporate environment. However, after a thorough examination of the claims brought forth in the shareholder derivative lawsuit, I firmly believe that the motion to dismiss is crucial to prevent unnecessary disruption, potential harm to the company's reputation, and the wasteful expenditure of resources. To provide context, Puerto Rico corporate laws permit shareholders to initiate derivative actions on behalf of the company when the fiduciary duties of the company's directors and officers have allegedly been breached, leading to harm against the company. While derivative claims are an important tool to hold corporate leaders accountable, it is essential to distinguish between valid claims that truly benefit the company and those initiated for personal gain or based on frivolous allegations. In the case at hand, the majority of the shareholder derivative claims lack merit, fail to demonstrate harm to the company, and appear to be driven by personal motivations rather than a genuine concern for the company's well-being. Furthermore, careful review reveals that the claims lack sufficient evidence, fall outside the statute of limitations, or rely on incorrectly interpreted facts. As a fiduciary duty of the company's directors and officers is to act with utmost care in the best interest of the shareholders, dismissing these claims will protect the company from unnecessary legal costs, safeguard its reputation, and allow management to focus on strategically driving growth and enhancing shareholder value. In support of the motion to dismiss, I have attached a detailed memorandum outlining the legal basis for the dismissal of each claim, citing relevant Puerto Rico corporate laws and precedent cases that align with our position. It is my hope that upon careful review of the memorandum, you will find merit in the motion to dismiss and act accordingly. I kindly request that you share this letter, along with the attached memorandum, with all relevant stakeholders, including the board of directors and legal counsel, to ensure a comprehensive understanding of the shareholder perspective and the necessity of dismissing these claims. Thank you for your time and attention to this matter. I trust that you will make an informed decision that upholds the principles of good corporate governance and protects the best interests of the company and its shareholders. Should you require any further documentation or have any questions regarding the contents of this letter, please do not hesitate to contact me at [Your Phone Number] or via email at [Your Email Address]. Yours sincerely, [Your Name]
Puerto Rico Sample Letter regarding Motion to Dismiss on Shareholder Derivative Claims
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FAQ
If the committee's suggestion is to support the action, then the board will likely enter the suit and take up the action against the directors who have pursued or are pursuing the illegal or improper course of conduct.
What Are The Shareholder's Remedies In A Private Corporation? Voting Rights. This is a shareholder's primary right. ... Meeting Rights. The shareholders have the right to attend annual meetings. ... Right to Information. ... Court Ordered Meetings. ... Derivative Action. ... Oppression Remedy.
Remedies commonly sought in derivative actions include corporate governance reforms designed to prevent future fiduciary misconduct, the removal of officers or directors whose misconduct injured the corporation, monetary payments to remedy damages incurred by the company, and repayment of funds obtained illegally.
Derivative suits refer to one or more shareholders bringing an action (lawsuit) in the name of the corporation against a party or parties allegedly causing harm to the latter. If the directors, officers, or employees of the corporation are not willing to file an action, a shareholder may first petition them to proceed.
Pursuing a Derivative Action Shareholders must prove they will fairly represent the interests of the company; and. Shareholders must formally demand, in writing, the company's board take action on the basis of suspected misconduct.
A derivative action is brought by a shareholder on behalf of the company; this means that if a derivative action is successful, any damages awarded are awarded to the company and not the shareholder(s) who brought it.
Firstly, a shareholder has to seek permission from the court to commence derivative proceedings. The court must refuse to grant permission if it considers there is no prima facie case. If permission is not refused at that stage then the court will order the application for permission to be served on the company.
Still, derivative action involves a wrong against the corporation and not individual shareholders; therefore, damages do not go to the shareholders personally but to the corporation itself.
To protect the organization and its owners, shareholders must be able to take legal action when those in a position of power in the business fail to live up to their legal obligations. A shareholder derivative action makes it possible for shareholders to use the legal system to make a claim against insiders.
Derivative claim remedies Damages payable to the company from the director(s) held to be at fault. An injunction to prevent the director(s) at fault against taking any further unlawful action/committing any further breaches. The setting aside of transactions which have personally benefitted the director(s) at fault.
