A shareholder derivative suit is filed when the directors have refused to take action against a third party.

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A shareholder derivative suit allows shareholders to sue on behalf of the corporation when the directors have refused to take legal action against a third party. A shareholder derivative suit is a lawsuit filed by a shareholder on behalf of a corporation against a third party, usually the directors or officers of the corporation, for failing to take action against that third party.

A Shareholder Derivative Suit Is Filed When the Directors Have