How a shareholder derivative action works

A previous post on this blog talked about what constitutes a breach of fiduciary duty. As that post discussed, officers and directors of corporations in the Portland area, from Nike all the way down to a small, family-owned Sunday brunch joint, have an obligation to put the best interests of the corporation and its shareholders over their own interests.

Unfortunately, many officers and directors do not live up to their fiduciary duties. Even if no crimes get committed, directors and officers can commit serious indiscretions that can damage or even ruin a business. It is sad that, on many occasions, other managers and directors fail to correct these problems right away.

This is a point in which a shareholder of the company's stock may wish to initiate what is called a shareholder derivative action. Basically, a shareholder derivative action is a type of business litigation in which an individual shareholder, on behalf of the corporation, seeks a court order either for damages or other relief that will prevent a rouge director or officer, or even a wayward board, from continuing to illegally harm the corporation.

A shareholder derivative action can be the last line of defense a shareholder can exercise on behalf of a business he or she loves. It is important to remember, though, that because this litigation allows shareholders to do the right thing when officers and directors will not, a shareholder must prior to filing an action first give the corporation's governing body the opportunity to address the issue directly.

Shareholder derivative actions in Oregon can be complicated affairs. However, a shareholder who feels that her business is being endangered by irresponsible actions at the top of the management ladder can explore this legal option with an experienced business attorney.

No Comments

Leave a comment
Comment Information
Email Us For a Response

Do you need results?

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Portland Business Lawyer

Office Location

Bryan P. Murphy, P.C.
220 NW Eighth Avenue
Portland, OR 97209

Toll Free: 877-821-6187
Toll Free: 8778216187
Phone: 503-505-7954
Phone: 503-505-7954
Fax: 503-294-3970
Portland Law Office Map

Phone Numbers