Louisiana Sample Letter regarding Motion to Dismiss on Shareholder Derivative Claims
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How to fill out Sample Letter Regarding Motion To Dismiss On Shareholder Derivative Claims?
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FAQ
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.
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 derivative action may be settled, voluntarily dismissed, or compromised only with the court's approval. Notice of a proposed settlement, voluntary dismissal, or compromise must be given to shareholders or members in the manner that the court orders.
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.
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.
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.
Shareholder derivative suits can address a range of misconduct and fraudulent actions, including: Breach of fiduciary duty: Corporate officers and directors owe a fiduciary duty to the corporation that they serve, and they can be held liable if they failed to uphold their duty. Fraud and unlawful activity. Self-dealing.
What is the difference between a stockholder's derivative suit and a class action? A derivative lawsuit is brought by a shareholder of a corporation for the benefit of the corporation. A shareholder's class action lawsuit is brought by a shareholder for the benefit of themselves and the other shareholders.
The derivative action is a remedy for a wrong committed to the company itself, as opposed to the oppression remedy which relates to a wrong to the individual shareholders in their capacity as shareholders. For information about the oppression remedy see the Oppression Remedies section in this website.
If a shareholder wins a derivative suit, the corporation can undergo higher share prices. This often results in higher dividends to shareholders. Derivative suits are necessary because the board of directors are the primary operators of the corporation.
