Protecting Corporate Interests and Investor Rights
When company leaders make decisions that harm a publicly traded corporation, or when they put their own self-interests ahead of the corporation’s interest, the damage can negatively impact the company and its current stockholders.
Directors and officers are expected to act in the best interests of the company. When they fail to do that, a company’s current shareholders have the right to step in to enforce the company’s rights and hold the wrongdoers responsible. At Kaskela Law, we represent investors in cases involving corporate misconduct, mismanagement, and breaches of fiduciary duty. Our goal is to help protect companies and their shareholders from abuse.
Kaskela Law only handles shareholder derivative litigation on a contingent basis. There is never any cost to our clients, and the firm only ever receives compensation for its services if it is able to achieve a monetary recovery or other recognizable stockholder benefit. We encourage you to visit our featured cases page to review some of our notable results in shareholder derivative cases, and to contact us today if you would like for us to review any of your investments for potential corporate mismanagement.
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What is Shareholder Derivative Litigation?
A shareholder derivative lawsuit involves legal claims brought by a shareholder on behalf of the company to enforce the company’s rights and address harm done to the company.
In many situations, the company’s leadership would decide whether to pursue legal action. But if the people responsible for the misconduct are the company’s leadership itself, they may choose not to act, thereby further harming the company and its current stockholders.
Derivative lawsuits give shareholders a way to hold corporate leaders accountable and help address damage done to the company by their wrongful actions.
Why Shareholder Derivative Lawsuits are Filed
Shareholder derivative cases arise when corporate officers or directors make decisions that harm the company. These actions may include:
- Breach of fiduciary duty: Company leaders are required to act in the best interests of the corporation and its shareholders. When they put personal or other interests ahead of those of the company, they may violate their fiduciary duties.
- Gross corporate mismanagement: Objectively inexcusable and/or careless management can lead to financial losses and damage to the company’s reputation.
- Self-dealing or conflicts of interest: Executives or board members may use their position to benefit themselves instead of the company.
- Waste of corporate assets: Misuse of company funds or resources can weaken the business and reduce shareholder value.
- Failure of oversight: A board that fails to properly monitor company operations may allow misconduct or illegal activity to occur.
When these types of problems arise, shareholders can pursue a derivative lawsuit to protect the company and their investment in it.
How Shareholder Derivative Litigation Works
In a derivative case, a company’s current shareholder will file a lawsuit on behalf of the corporation against the company’s board of directors to address harm done to the corporation. The goal of that litigation is to restore value to the company and address the wrongdoing that caused the harm, oftentimes with robust corporate governance reforms.
Derivative cases also frequently lead to material improvements in a company’s corporate governance, policies, or leadership decisions, which help to prevent similar problems from happening again in the future.
Who Can Bring a Shareholder Derivative Claim?
To bring a derivative lawsuit, a person must be a shareholder of the injured company (i) at the time the alleged misconduct occurred, and (ii) continue to remain a shareholder during the pendency of the litigation.
There are also certain critical legal steps that must be followed before filing the case. For example, shareholders are often required to first make a demand upon the company’s board of directors to take action. This is known as the demand requirement.
However, in some situations, making that request would not make sense because the board members involved in the decision may be connected to the misconduct. Under those circumstances, the shareholder may be able to move forward with the lawsuit without making that demand. The determination of whether or not to make a demand upon the company’s board for action is of critical importance to the ultimate success of a derivative action. Experienced counsel will explain to you the benefits and drawbacks of the differing strategies and make a recommendation to you about which strategy to employ based upon the specific facts of a given situation.
The Goals of Shareholder Derivative Litigation
Shareholder derivative litigation serves several important purposes. These cases can help:
- Hold corporate leaders responsible for misconduct
- Recover money lost by the company and its current stockholders
- Encourage better corporate decision-making
- Improve oversight and internal policies
- Protect and improve the long-term value of the business
By bringing these cases, shareholders help promote accountability and stronger corporate governance.
Examples of Issues That May Lead to Derivative Litigation
Derivative lawsuits can arise in many different situations involving corporate wrongdoing. Some examples include:
- Executives engaging in transactions that benefit themselves rather than the company
- Boards approving excessive executive compensation that is not tied to company performance
- Company leaders failing to disclose important information to shareholders
- Corporate officers participating in or negligently overlooking fraudulent or illegal activity that harms the business
When these types of actions occur, derivative litigation may provide a way to address the misconduct and protect the company.
Speak with a Shareholder Litigation Attorney to Learn Your Legal Rights and Options
If something doesn’t feel right about how a company is being run, it’s worth having experienced legal counsel take a closer look to see if any actionable misconduct has occurred. When corporate leaders put their own interests first or make decisions that harm the business, shareholders shouldn’t be left dealing with the consequences alone – they are entitled to experienced legal counsel to help protect their legal rights.
At Kaskela Law, we take these concerns seriously. Our team carefully reviews the facts, explains your options in plain terms, and helps you decide what steps make sense. If there is a case, we are ready to act and pursue it with focus and persistence. We encourage you to review our featured cases page to see what we have been able to accomplish in the recent past on behalf of injured companies and their stockholders.
Don’t wait while the damage continues. If you believe a company you’ve invested in has been harmed by misconduct or poor leadership, contact us today. A simple conversation can help you understand where you stand and what you can do next.