Also known as: by the corporation · on behalf of the corporation · corporate agency · corporate representation
Written by attorneys · grounded in primary & secondary sources — see below
A category of legal proceedings against directors or officers that encompasses both direct actions brought by the corporation and derivative actions brought by shareholders in the corporation's name for breaches of duty owed to the corporation.
Benito Benitez, a director of Bayside Shipping, faces a derivative suit brought on behalf of the corporation alleging breach of duty in approving an improper contract. A shareholder plaintiff delivers a signed written waiver of notice for a special meeting called to discuss settlement options. The waiver is filed with the corporate records, allowing the meeting to proceed despite the short timeframe under the statute.
Bristol Steel brings a direct action against its former officer Brian Bailey for self-dealing in asset purchases that harmed the company. The suit proceeds under the statute authorizing the corporation to act directly against the officer. Recovery of losses flows to the corporate treasury as a result.
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Bianca Blanco, a shareholder of Blackwood Technologies, sues to enjoin an unauthorized corporate act that would dilute her holdings. The court considers whether to set aside the transaction after finding all affected parties joined and equity favors relief. Damages for losses to the corporation are also available if the injunction issues.
Brianna Burke files a derivative action on behalf of Blue Horizon Industries against directors for waste of corporate assets. The court requires her to post security for costs under the applicable rule because the suit is brought on behalf of the corporation. Failure to post the bond leads to dismissal of the action.
Byron Bishop, a shareholder of Bayside Shipping, brings a derivative suit on behalf of the corporation challenging a merger approved after misleading proxy disclosures. The court examines whether the statements were materially false in the context of the action brought for the corporation's benefit. Dismissal follows when the alleged omissions lack the required connection to the vote.
Bethany Boyd files a derivative suit on behalf of Bristol Steel alleging directors breached fiduciary duties in a short-form merger. The court holds that the federal securities laws do not reach the internal corporate claim. The action brought on behalf of the corporation is dismissed for lack of a federal cause of action.
The phrase refers to suits brought directly by the corporation or derivatively by shareholders in the corporation's name alleging breach of duties owed to the corporation itself. Indemnification rules treat these actions differently from third-party suits because the corporation is both the real party in interest and the potential indemnitor.
Indemnification is generally unavailable or more restricted in suits brought by or on behalf of the corporation because the corporation would be paying its own recovery. Statutes permit indemnification only when the individual meets strict standards such as good faith and a reasonable belief that the conduct served the corporation's interests, and many provisions bar indemnification for judgments in derivative actions.
Advancement of expenses is more readily available in third-party proceedings than in actions brought by or on behalf of the corporation. In the latter category, statutes and bylaws often condition advancement on an undertaking to repay if the individual is ultimately found not entitled to indemnification, reflecting the risk that the corporation would fund its own claim.
…the October 8 board meeting of Trans Union, the investment banking firm of Salomon Brothers was retained by the corporation to search for better offers than that of the Pritzkers, Salomon Brothers being charged with the responsibility of doing "whatever possible to see if there is a superior bid in the…