Abstract
A derivative action is an action brought by a shareholder or director of a company in the name of and on behalf of that company in respect of a wrong done to the company, rather than to its shareholders. It is ‘derivative’ as the party bringing the action does not have the right to sue, but such a right is ‘derived’ from that of the company. Normally, the authority to take legal action lies with the board as it has management responsibility. However, where the alleged wrongdoers are the directors themselves who control the company, the law gives shareholders the ability to commence action on the company’s behalf.
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