Securities Law And Litigation: Protecting Shareholder Rights In A Derivative Action
In the complex world of securities law, investors and shareholders have rights that safeguard their interests. These laws are designed to promote transparency and protect stakeholders from unfair practices in the trading of investments.
Attorney Richard A. Maniskas founded his Pennsylvania-based law firm, RM LAW, and dedicated his legal career to seeking justice for clients affected by securities and consumer fraud. From his office in Berwyn, he represents shareholders and investors in shareholder derivative litigation and securities class action lawsuits, helping plaintiffs seek justice for wrongdoing.
Understanding Derivative Claims
A derivative claim is a legal action brought by a shareholder on behalf of a corporation against a third party, often an insider of the corporation. These claims arise when those in control of the company engage in wrongful conduct that harms the corporation.
The purpose of a derivative claim is to rectify the wrongdoing and recover damages for the company, ultimately benefiting all shareholders. In securities law, derivative claims can be based on various foundations, such as breach of fiduciary duty, insider trading, fraud or misrepresentation.
What Is The Process For Bringing A Derivative Claim?
Derivative claims are fundamentally complex and require substantial preparation and proof. Bringing a derivative claim involves several steps. These steps include:
- Standing: First, the shareholder must demonstrate that they were a shareholder at the time of the alleged wrongdoing.
- Representation: They must also prove that they fairly and adequately represent the interests of the corporation and its shareholders.
- Formal demand: Before filing a lawsuit, the shareholder typically needs to make a formal demand on the corporation’s board to address the issue. If the board refuses or fails to take action, the shareholder may then proceed with the lawsuit.
Derivative actions come with inherent challenges. They require demonstrating that the board’s refusal to act was unjustified, which can be difficult due to the business judgment rule that protects directors’ decisions. Additionally, these lawsuits can be complex and time-consuming, often involving extensive discovery and legal maneuvering.
What Are The Advantages Of Bringing A Derivative Claim?
There are several advantages to bringing a derivative claim. These claims can lead to financial recovery for the corporation, which benefits all shareholders. They can also result in corporate governance reforms, enhancing transparency and accountability within the company. Furthermore, derivative claims can deter future misconduct by holding wrongdoers accountable and setting a precedent for proper corporate behavior.
What Rights Do Shareholders Have In A Derivative Lawsuit?
In a derivative lawsuit, shareholders have the right to initiate legal action on behalf of the corporation. They have the right to:
- Seek remedies for the harm caused to the company
- Request changes in corporate governance
- Demand that the court oversee proceedings to ensure fairness and justice
Throughout the process, shareholders also have the right to be informed about the progress and outcomes of the lawsuit.
Attorney Maniskas has more than 20 years of experience protecting the rights of shareholders in complex merger and acquisition litigation and consumer fraud class action lawsuits. He can guide you through the intricacies of a derivative shareholder lawsuit.
Consult A Securities Litigation Attorney
If you are considering bringing a derivative action, consulting a knowledgeable securities litigation attorney is crucial. Attorney Maniskas is available for initial consultation appointments to discuss your potential derivative claims and provide guidance regarding your legal options. To schedule an appointment, call the firm at 484-615-2007 or send an inquiry through the firm’s website.