What is a derivative action?
A) It is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act.
B) It is a right of shareholders to protect dilution of their percentage of share ownership.
C) It is an agreement made in advance among shareholders to vote in a particular manner.
D) It is a shareholder voting method permitting the holder to distribute his total votes in any manner that he chooses-all for one candidate or several shares for different candidates.
E) It is a doctrine holding that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful powers.

Question

Quizplus · Accepted Answer

A derivative action is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act. The action derives its name as the shareholder is essentially "deriving" his or her right to sue from the corporation. The purpose of a derivative action is to enforce a right belonging to the corporation, rather than an individual shareholder.

What Is a Derivative Action