Shareholder’s Derivative Suits

In South Carolina, shareholder derivative suits are suits brought by an existing shareholder on behalf of the company against the officers and directors of the company based on a breach of fiduciary. These suits are unlike a direct claim a shareholder may bring for losses suffered by the individual shareholder for matters such as failure to pay dividends. Instead, in a derivative suit, the shareholder sues for losses to the corporation itself. The corporation may play different roles in a derivative suit. For example, the corporation may be an active party in the litigation, it may be passive, or it may side with the individual defendants and argue that their conduct did not harm the corporation. In addition to claims based on a breach of fiduciary duty, shareholder derivative suits oftentimes involve excessive officer compensation, proxy violations, option plan violations, misappropriation of corporate opportunities, and corporate waste.

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