shareholder derivative suit
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.
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shareholder derivative suit
A special type of class action lawsuit filed by one shareholder or by a limited number of shareholders on behalf of all of the other shareholders in a firm. An example is such a suit filed against a mutual fund's management in which the litigants claim excessive management and distribution fees.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.