derivative action

noun

Legal Definition of derivative action

: a suit brought by a shareholder on behalf of a corporation or by a member on behalf of an association to assert a cause of action usually against an officer which the corporation or association has itself failed to assert for its injuries

called also derivative suit, shareholder's derivative suit

— compare direct action sense 2

Note: A shareholder or member bringing a derivative action must describe in the complaint attempts to obtain action from the corporate directors or association authorities, or from other shareholders or members, and the reasons these attempts failed. The plaintiff must fairly and adequately represent the other similarly situated shareholders or members, and the action may not be collusive. Federal Rule of Civil Procedure 23.1 governs derivative actions brought in federal court.

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Cite this Entry

“Derivative action.” Merriam-Webster.com Legal Dictionary, Merriam-Webster, https://www.merriam-webster.com/legal/derivative%20action. Accessed 19 Sep. 2021.

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