Texas Sample Letter regarding Motion to Dismiss on Shareholder Derivative Claims
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FAQ
Derivative actions permit a shareholder to sue on behalf of the corporation or LLC where the corporation or LLC has been damaged.
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.
A derivative suit is an action filed by stockholders to enforce a corporate action. A stockholder may bring an action in the name of a corporation or association as the case may be. In derivative suits, the real party in interest is the corporation, and the suing stockholder is a mere nominal party.
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.
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.
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.
