Derivative Action

A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do.

A derivative action, more popularly known as a STOCKHOLDER'S DERIVATIVE SUIT, is derived from the primary right of the corporation to seek redress of legal grievances through the courts. The procedure to be followed in such an action is governed by the rules of federal CIVIL PROCEDURE and state provisions, where applicable.