What is the term for a lawsuit brought by one or more shareholders in the name of the corporation?

• A. Derivative suit
• B. Tender offer
• C. Takeover
• D. Partnership

Answer: (A)

A derivative suit is a lawsuit filed by shareholders on behalf of the corporation to address wrongs committed against the company, typically by its directors or officers. In this setup, the plaintiff acts as a representative of the corporation, and any recovery goes to the corporation rather than to the individual shareholder. This mechanism lets owners push for accountability when management fails to pursue remedies, such as in cases of breach of fiduciary duty, mismanagement, or self-dealing. There is usually a requirement to show the shareholder had an interest and, in many cases, to make a demand on the board before suing (unless a demand would be futile). The other options describe transactions or organizational forms rather than a lawsuit brought in the corporation’s name.