Minority shareholders may bring a derivative lawsuit or action against the majority stockholders on behalf of the corporation itself. Depending on the voting percentages, the shareholders may simply decide to voluntarily dissolve the corporation and divide the remaining profits and assets.
Therefore, the company, not its shareholders, has the right to sue for wrongs done to it; and (ii) absent the rule, a shareholder would always be able to sue for wrongs done to the corporation which indirectly cause harm to the shareholder.
Just like a C corporation, an S corporation is a separate legal entity from its owners. … Under certain circumstances, however, individual shareholders can be sued personally even if they operate as an S corporation.
If a company has a cause of action, a shareholder can file a derivative lawsuit. A shareholder may also sue to enforce her own claim against the corporation, the directors, the officers or a majority of shareholders in a direct action.
A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation. Generally, a shareholder can only sue on behalf of a corporation when the corporation has a valid cause of action, but has refused to use it.
Shareholders are permitted to sue the corporation directly only if their own rights have been harmed.
Shareholders v Directors – who wins?
- to attend and vote at general meetings of the company;
- to receive dividends if declared;
- to circulate a written resolution and any supporting statements;
- to require a general meeting of the shareholders be held; and.
- to receive the statutory accounts of the company.
Approving the company’s final dividend. Appointing or re-appointing the company’s auditors. Electing or re-electing the company’s directors. Approving amendments to the company’s articles of association.
At a general meeting, the shareholders can also pass a resolution telling the directors how they must act when it comes to a particular matter. If this is done, the directors must then take the action that the shareholders have decided upon.
Generally, shareholders are not personally liable for the debts of the corporation. … However, shareholders may also be held liable if a creditor can prove corporate formalities weren’t followed, shareholders commingled personal, and business funds or the corporation was just a shell designed to shield liability.
You can be reassured by the fact that, as a shareholder, you have ‘limited liability’ for the debts of the company. That means you are only responsible for company debts up to the value of your shares. More simply, the only money you risk losing if the company should fail is the money you put in.