A derivative action is a mechanism for shareholders to hold third parties (corporate officers or directors) liable for corporate misfeasance. A derivative action is a unique instrument in that it entails shareholders bringing a cause of action, on behalf of the corporation, against corporate officers or directors. In other words, shareholders have the ability to file a lawsuit, on behalf of the corporation, against the corporation's directors and officers — the very people in control of running the corporation.

When Derivative Actions Should Be Brought

Derivative actions are generally suitable when a corporate officer or director breaches their fiduciary duty (the duty of loyalty, the duty of care and the duty of good faith). A corporate officer or director breaches his or her fiduciary duty when:

  1. An officer or director acts with negligence or otherwise grossly mismanages the corporation.
  2. An officer or director engages in criminal activity.
  3. An officer or director engages in self-dealing.

A successful derivative action will result in the court ordering the corporate officer or director to make changes for the benefit of the corporation.

Contact Our Attorneys Today

If you believe your investment as a shareholder is being compromised by corporate misfeasance, please contact Foote, Mielke, Chavez & O'Neil. LLC, in Geneva, Illinois, for a free, no-obligation consultation with an attorney. The lawyers at Foote, Mielke, Chavez & O'Neil, LLC, will investigate your claim and advise you as to your rights in bringing a derivative action. Our law firm has a strong reputation for achieving results in complex litigation matters. Contact our office by calling 630-232-7450.