| When a director or corporation is injured via the | | | | exists, much like the model penal code, requires |
| actions of the board or an officer of the | | | | that if a shareholder wants t derivative lawsuit |
| company, a derivative lawsuit can be brought. A | | | | filed, he or she must send a letter to the board |
| derivative lawsuit is different from other lawsuits | | | | of directors demanding such a thing. The |
| in a variety of ways and also provides a different | | | | shareholders must then wait for 90 days to find |
| sort of action following a lawsuit. | | | | out what the board has determined. If the |
| There are two broad types of lawsuits that | | | | shareholders are annoyed with the entire board, it |
| shareholders can file when there has been an | | | | is easy to see how the written requirement and |
| injury; a direct lawsuit or a derivative lawsuit. A | | | | board filing rules could impede the shareholders |
| direct lawsuit is a lawsuit that has been brought to | | | | from getting the lawsuit they want. |
| redress the harm or harms done to an individual | | | | The Delaware statute does not require a written |
| shareholder. In this type, the damages that are | | | | letter but the lawsuit must still be brought by a |
| recovered are given to the individual shareholder | | | | director. If the board under the model code |
| that has filed the lawsuit in the first place, not to | | | | refuses to file the suit, the decision of the board |
| the company or the shareholders in general. A | | | | will be judged by the same standard of review as |
| derivative lawsuit is different. | | | | any other board decisions, namely loyalty and |
| Derivative lawsuits, on the other hand, are | | | | care. |
| brought on behalf of the entire corporation for | | | | There is a loophole to the written demand/waiting |
| injuries to the entire corporation. When this type | | | | period requirement included in the model code. If |
| of lawsuit occurs, it is generally due to a breach | | | | the idea of writing a letter would be seen as |
| of some prong of fiduciary duties. These lawsuits | | | | "futile" then there is not a requirement to write a |
| are brought by directors, sometimes at the | | | | letter. Futility is seen as being in place if all or a |
| behest of the general shareholders, and any | | | | majority of the directors have an interest in the |
| damages go to the corporation. | | | | lawsuit. Having an interest would be "being part of |
| Because derivative lawsuits can only be brought | | | | the lawsuit itself" or having to sue the board of |
| by a director of a company, there are certain | | | | which they are a part. Suiting one's self is seen as |
| procedures that must be followed in order to | | | | having an interest in a lawsuit. |
| bring the suit. The model corporate statute that | | | | |