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Shareholder derivative claims and breach of fiduciary duty

On Behalf of | Oct 25, 2018 | Business Litigation |


There are many corporations in Florida in many different industries that do many different kinds of work. However, while there are many differences between the corporations in Florida, they all have one main similarity: they all have shareholders. The number of shareholders depends on the size of the company and other factors, but the shareholders own a piece of the company. This does not necessarily mean that they run the day-to-day operations of the company, but they do have a financial interest in the company.

That financial interest is directly affected by the success or lack of success of the company. The decisions made by the directors and managers of the company are therefore very important to shareholders. The shareholders may not agree with every decision the company makes, but they must trust that the decisions made by the directors and managers are being made to benefit the corporation only. However, this does not always happen, and sometimes their decisions hurt the company and ultimately the shareholders.

So, in certain situations the shareholders can bring a lawsuit against the directors and managers of the company called shareholder derivative claims. These are brought against the company and generally claim that decisions made by the directors breached their fiduciary duty to the company and hurt it.

Before a shareholder derivative claim is filed, though, the shareholder must make a demand on the directors to do what the shareholder would like the directors to do. They must give the directors at least 90 days to meet these requests. If the directors do not do so, then the shareholder can initiate the lawsuit. One unique characteristic of these claims though is that they are brought for the benefit of the corporation. So, if successful any monetary awards go back to the corporation and not directly to the shareholders.

There are many people in Florida who are shareholders in the various corporations in the state. Sometimes these shareholders may feel that the directors breached their fiduciary duties or duty of loyalty to the corporation. If they do, the shareholders may be able to initiate a shareholder derivative claim to hold them accountable.