Shareholder Derivative Actions: Your Tool Against Corporate Misconduct
When the people running a company harm the business itself, shareholders and members often feel powerless. You invested in good faith, but management or directors are making decisions that damage the company you own.
At the Schwartz Law Firm, we help business owners hold leadership accountable through shareholder derivative action in Minnesota. This legal tool allows us to step in when those in control refuse to protect the company’s interests. We understand the frustration of watching a business you care about suffer from internal wrongdoing.
What Is A Derivative Action?
A derivative action is a lawsuit brought by a shareholder or member on behalf of the company. Instead of suing for your own personal losses, you are suing to recover damages or obtain relief for the business itself.
The company is the real injured party, but when management does not take action against themselves or their associates, the law allows owners to step up. We file these claims in the company’s name, seeking remedies that benefit the corporation or LLC as a whole.
How Does It Differ From A Direct Lawsuit?
In a direct lawsuit, you sue because you personally suffered harm separate from other owners. In a derivative action, the company suffered the harm, and you are acting as its representative. The distinction matters because it determines who has the right to sue and who receives any recovery.
Derivative Action Versus Direct Claim
In derivative cases, the company itself is the victim. Management may have stolen assets, wasted corporate opportunities or breached fiduciary duties in ways that depleted company resources.
In direct claims, you personally lost money or rights distinct from the harm to the business. Any damages we recover in a derivative action go to the company, not directly to you. This increases the company’s value, which indirectly benefits all shareholders. In direct claims, you receive the compensation personally.
For example, if a CEO secretly diverts a profitable contract to their own side business, the company loses that revenue. We would bring a derivative action to recover the company’s lost profits. If directors vote to dilute only your shares unfairly, that is a direct claim because you alone suffered distinct harm.
Common Scenarios Leading To A Derivative Action
We frequently see derivative actions arise from:
- Self-dealing transactions where directors approve deals benefiting themselves at the company’s expense
- The misappropriation of corporate assets
- Excessive compensation without justification
- Usurping business opportunities
These situations often overlap with other shareholder disputes.
How The Schwartz Law Firm Can Help
When you choose us, we will pursue derivative actions with clear objectives:
- First, we will seek to recover financial losses the company sustained due to misconduct.
- Second, we will work to implement governance reforms that prevent future abuse.
- Third, we aim to remove directors or officers who violated their duties.
These goals restore integrity to the business and protect your investment.
Contact Us Today
If you believe company leadership has harmed your business, we can evaluate whether a shareholder derivative action in Minnesota is appropriate. Contact us at 651-359-9632 or send us a message to discuss your situation.