A lawsuit filed by a shareholder on behalf of a corporation against its directors, officers, or other parties who have allegedly harmed the company. The shareholder 'derives' their right to sue from the corporation's right, stepping in when the company's leadership fails to take action against wrongdoing.
From Latin 'derivatus' meaning 'drawn from' and Old French 'suite' meaning 'following.' The legal concept emerged in 19th-century corporate law when courts recognized that shareholders needed a mechanism to hold corporate management accountable when the corporation itself wouldn't act.
It's like being able to sue someone who stole from your friend when your friend refuses to press charges! Derivative suits exist because corporations are legal persons, but sometimes the people running them won't defend the corporation's interests, so shareholders have to step in as guardians.
Complete word intelligence in one call. Free tier — 50 lookups/day.