Derivative Action Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Derivative Action, written in plain English, along with examples of how it is used.

What is Derivative Action?

n. A corporate shareholder’s lawsuit that is filed against the management, directors, and/or other corporate shareholders for a management failure. Due to the directors and management failing to exercise their authority on behalf of the company and its shareholders, the suing shareholder claims to be acting on behalf of the corporation. These suits arise when fraud occurs, there’s mismanagement, self-dealing and/or dishonesty which the officers and board of directors are ignoring.