Shareholder Derivative Suits

Business meeting of two partners

Shareholder Derivative Suits are lawsuits brought by shareholders of a corporation against other shareholders to recover damages sustained by the corporation. For example, if certain shareholders of a corporation have stolen corporate funds, the other shareholders may file an action in the name of the corporation against the wrongdoers. Because the corporation has been harmed by the wrongdoers, the lawsuit proceeds in the name of the corporation – not in the name of the filing shareholders. Therefore, the corporation recovers any damages awarded, not the individual shareholders.

For shareholders who have been individually wronged by the conduct of other shareholders, they may have a direct action against the wrongdoers. These actions are also called shareholder “freeze outs” or “shareholder oppression.” Frequently, the claims overlap, and the lawsuit against the wrongdoer contains multiple counts – some in the name of the corporation, and others in the name of the individual shareholders.

If you need assistance regarding a Shareholder Derivative Suit or a Shareholder Freeze Out, contact Attorney Vincent Schindeler at (954) 522-8686.

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