As a shareholder in a corporation, your interests are directly tied to the company’s prosperity. Your top priority should be protecting your business investment and usually, the Board of Directors will take care of this. While the Board of Directors may have a legal obligation to protect your best interests, this does not always happen. The board members or officers may be self-dealing or breaching other fiduciary duties. Luckily, there are legal remedies available to you, the shareholder. Depending on the circumstances, there are two types of shareholder lawsuits available.
Shareholder Derivative Claims
A shareholder derivative claim is one option. This type of lawsuit is most common when an officer or director is mismanaging the company or using it for their personal advantage and other officers are indifferent. If the actions of the officer or board member have harmed the company, you may be able to file a lawsuit against the directors or officers on behalf of the corporation. In this type of lawsuit, you are acting as the corporation’s representative and looking out for its best interests. If successful, the court will award the corporation damages rather than yourself individually, although you can seek to have your attorney fees paid under the common fund doctrine. The purpose of this lawsuit is to protect your investment by preventing further damage.
Additionally, this type of claim can seek other remedies like removing an officer or director from their position. There are procedural requirements, such as making a demand on the company, that often need to be taken, and it is therefore important to retain an attorney experienced in these matters to make sure the claim is not defeated on a technicality.
Shareholder Direct Lawsuit
A shareholder direct lawsuit is another option. If the actions of the officer or board member have led to distinct personal harm to you, you would file this type of lawsuit. Unlike derivative claims, the court would award any damages to you personally.
Which is the Right Option?
While filing a direct claims lawsuit may seem like the most appealing option, it depends on the circumstances. For certain claims, you can only file a derivative lawsuit. It is important to carefully analyze the options so that you maximize the chance of recovery and minimize the other side’s defenses. A Chicago shareholder lawsuit lawyer can help determine which type would be best for your case.
Our experienced Chicago shareholder dispute attorneys have extensive experience litigating both derivative and direct claims. Contact us at (312) 223-1699 for a free consultation.