Shareholder derivative suits are often filed when certain investors in a company feel that decisions made by officers or executives will ultimately be detrimental to the firm. Such a lawsuit was recently filed by shareholders for Dell, Inc., a personal computer manufacturer, with regards to a proposed buyout by the founder of the company.
The investors feel that the buyout is being conducted at an inadequate price. The company founder and an investment firm are attempting to buy out the company for $24.4 billion, which amounts to $13.65 per share. Especially when it comes to minority shareholders in the company, the company directors are being accused of breaching their fiduciary duty by failing to provide these shareholders the maximum price for their shares.
Especially when it comes to a transaction of this size, shareholders could possibly be set up to lose a great deal of money from share price losses if a buyout of the company is conducted at a lower price than the company (and shares) is actually worth. The purpose of a derivative suit could put on public display for other shareholders in the company practices of directors or officers that may possibly be detrimental to the corporation.
Though these types of lawsuits are common, the attorney representing shareholders in such a lawsuit has to effectively make the case as to why their client’s financial interests could be harmed if nothing is done about a director’s actions. This is not always easy to prove when we are talking about sales of companies that may end up in the billions of dollars.
For these types of business disputes, attorneys need to aggressively represent their clients, have knowledge of state, federal and in some cases international law, and have a thorough understanding of a wide variety of business related matters.
Source: Connecticut Post, “Shareholder suit challenges Dell buyout plan,” by Randall Chase, Feb. 6, 2013
- Learn about a variety of business disputes and commercial litigation matters tried in Connecticut courts at our law firm’s website.