stockholder derivative suit


Also found in: Legal, Encyclopedia, Wikipedia.

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 ?
During fiscal 2001, $431,445 of expenses related to the termination of the stockholder derivative suit and a $125,000 one time fee for termination of a previous line of credit were included in operating expenses.
Although we failed to meet the BSE's technical requirement as of the end of our last fiscal, we believe that with the reduction in general and administrative expense, curtailing of our poorly performing retail finance division, and our moving towards closure of the settlement of the outstanding stockholder derivative suit approved by the court, which we hope will provide AutoLend with strong new leadership and business opportunities, the long term picture is positive," commented Steve Simon, CEO of AutoLend.
While a "loser pays" system remains uncertain in Delaware, in 2014, Oklahoma became the first state to adopt a law mandating fee shifting in stockholder derivative suits.