Stockholders' Derivative Action Legal Meaning and Definition

Here is a simplified definition of the legal term Stockholders' Derivative Action.

Stockholders' Derivative Action (n): A legal action taken by a shareholder on behalf of the company. This typically occurs when the shareholder believes the company is suffering harm due to poor management or unlawful activity. The shareholder sues in the company's name to protect the company's interests and their own as a shareholder.