Shareholder & Member Litigation

Question 1

Direct Action

Answer 1

A lawsuit brough by a shareholder to enforce his own rights when shareholder caused injury or breached duty.

prove individual injury

Question 2

Derivative Action

Answer 2

A lawsuit brought by a shareholder on behalf of the corporation to enforce the corporation’s rights.

corp has valid claim but failed to pursue

Question 3

Demand in Derivative Action

Answer 3

Shareholder must make written demand on the board before commencing action.

Shareholder must wait 90 days unless board rejects or demand would be futile.

Question 4

Damages from Derivative Claim

Answer 4

If derivative claim is successful, proceeds go to the corporation.