Friday, January 25, 2013

What Is A Derivative Action?

A derivative action seeks compensation for an injury suffered by the corporation or by stockholders generally, as a result of the actions of the Board of Directors. In a derivative action, the cause of action belongs to the corporation and not to the stockholders individually. The ability of individual shareholders to bring derivative actions for the corporation is codified in Florida’s Business Corporation Statute.  Fla. Stat. §607.07401.  Although Condominiums are not governed by this statute and instead are not-for-profit corporations, derivative actions could be applicable to Condominiums depending on the type of relief being sought by a unit owner.   It is also important to know that the relief being sought (whether money damages and/or other types of relief) goes to the corporation rather than to the actual plaintiff.