Final answer:
To bring a shareholder derivative lawsuit, a shareholder must have held stock at the time of the alleged corporate wrongdoing, still own those shares, typically had made a demand on the board which was refused or deemed futile, and be acting in the corporation's best interest, not just personal gain.
Step-by-step explanation:
Requirements for Bringing a Shareholder Derivative Lawsuit
A shareholder derivative lawsuit allows a shareholder to sue on behalf of a corporation when its managers fail to do so. The requirements for bringing such a lawsuit often include:
- The shareholder must have owned stock in the company at the time of the wrongdoing or acquired the shares through operation of law from someone who did.
- The shareholder must continue to own the shares through the duration of the lawsuit.
- The shareholder typically must show that they made a demand on the company's board of directors to take appropriate action, and the board unjustifiably failed to act.
- If a demand on the board is excused or deemed futile, the shareholder must demonstrate why this is the case, often because the board members are themselves implicated in the wrongdoing.
- The legal action should be in the best interest of the corporation, not just for the individual shareholder's personal gain.
These requirements are meant to protect the interests of the corporation and ensure that the lawsuit is necessary and appropriately conducted.