derivative claim

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A legal action brought by a shareholder on behalf of a company for a wrong done to it. A company will usually sue in its own name but if those against whom it has a cause of action are in control of the company (i.e.directors or majority shareholders) a shareholder may bring a derivative action. The company will appear as defendant so that it will be bound by, and able to benefit from, the decision. The need to bring such an action must be proved to the court before it can proceed.

Subjects: Law — Business and Management.

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