stockholder derivative suit

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Stockholder Derivative Suit

A lawsuit filed by one or more shareholders of a publicly-traded company in the name of the company. Often, this lawsuit is filed against a member of the company's management who committed an illegal, unethical, or negligent act. Directors' and officers' liability insurance can protect the management from losses as the result of one of these lawsuits. They are also called derivative suits and derivative action.

stockholder derivative suit

A lawsuit filed by one or more of a company's stockholders in the name of the company. A derivative suit is filed when the firm's management will not or cannot sue in the name of the company. For example, a stockholder may enter a derivative suit against the firm's chief executive officer to recover funds from a questionable or an improper act by that officer. Also called derivative suit.
References in periodicals archive ?
Derivatives suits and class actions concerning allegedly improper option grants will also implicate a company's directors and officers' insurance policies, and management and the board need to understand the effects on coverage at an early stage--particularly if any financial statements provided to insurers in the underwriting process will require restatement.
James serves as co-chair of the American bar Association Section of Litigation Class Actions and Derivatives Suits Committee.