How to File a Shareholder Derivative Action in Florida: Step-by-Step Process

When you invest in a company, you expect the directors and officers to act in the company’s, and ultimately your, best interest. But what happens when they don’t? When corporate leadership engages in fraud, self-dealing, or mismanagement that harms the company’s value, shareholders have a powerful legal tool at their disposal: the shareholder derivative action.

If you’re a shareholder in Florida and you believe the company’s leaders have violated their duties, this guide will walk you through what a derivative action is, when to file one, and the step-by-step process for bringing such a claim in Florida courts.

What Is a Shareholder Derivative Action?

A shareholder derivative action is a lawsuit brought by a shareholder on behalf of the corporation against individuals or entities, often its own officers, directors, or controlling shareholders, who have harmed the company.

In other words, it’s not a shareholder suing for their own personal losses. Instead, it’s the shareholder stepping into the company’s shoes to seek justice for the company itself.

For example:

• A director uses company funds for personal expenses.
• Officers engage in transactions that benefit them but harm the business.
• Management ignores or conceals illegal conduct that damages the company’s reputation.

When these types of issues arise, shareholders can bring a derivative action to compel accountability and recovery on behalf of the corporation.

When Should a Shareholder Consider Filing a Derivative Action in Florida?

Derivative actions are serious and often complex, so they’re not for every situation. You should consider this type of claim when:

• The company’s leadership has breached fiduciary duties, such as the duty of loyalty or duty of care.
• Internal complaints or demands to the board have been ignored or dismissed without reason.
• The misconduct directly harms the company as a whole, not just an individual shareholder.

Before filing, a shareholder must usually attempt to resolve the issue internally by making what’s known as a “demand” on the board of directors. This is a formal request asking the company to take corrective action.

Step 1: Make a Written Demand on the Corporation

Under Florida Statutes §607.0742, a shareholder must first make a written demand on the corporation requesting that it take suitable action to address the misconduct.

This step gives the company a chance to investigate and, if appropriate, file its own lawsuit. Skipping this step can lead to your case being dismissed.

The demand should clearly outline:

• The alleged wrongdoing or breach of duty.
• The harm caused to the corporation.
• The relief being requested (such as recovering funds or removing a director).

Once the demand is made, the board has 90 days to respond unless it rejects the demand sooner or waiting would cause irreparable harm to the company.

Step 2: Wait for the Board’s Response

After receiving the demand, the corporation may:

1. Accept the demand and take corrective action.
2. Reject the demand outright.
3. Do nothing within the 90-day period.

If the board refuses to act or delays without justification, the shareholder can move forward with a derivative lawsuit.

Step 3: File the Lawsuit on Behalf of the Corporation

Once the waiting period has passed or the demand is rejected, the shareholder can file the lawsuit in state court.

The complaint must include:

• Proof of shareholder status at the time of the alleged wrongdoing.
• Evidence that the demand was made (or reasons why making one would have been futile).
• A clear description of how the directors or officers breached their fiduciary duties.

Because derivative suits are filed on behalf of the company, any recovery or damages awarded go to the corporation, not directly to the shareholder who brought the case.

Step 4: The Corporation’s Response and Possible Motions

After filing, the corporation and the defendants may move to dismiss the case. Common defenses include:

• The shareholder lacked standing to sue.
• The demand requirement wasn’t properly met.
• The alleged conduct was protected under the business judgment rule, which shields directors who act in good faith.

Florida courts often take these motions seriously, so working with an experienced business litigation attorney is essential to ensure your case is properly framed.

Step 5: Discovery and Evidence Gathering

If the case survives early motions, it proceeds to discovery, where both sides exchange evidence. This stage can uncover internal communications, financial records, and board meeting minutes that may confirm (or refute) the alleged misconduct.

Given the sensitivity of these materials, discovery in derivative actions often involves strict confidentiality agreements and protective orders.

Step 6: Settlement or Trial

Many shareholder derivative actions in Florida are resolved through settlement. Settlements can include financial recovery for the corporation, changes to corporate governance, or removal of offending directors.

If no agreement is reached, the case proceeds to trial, where a judge (and sometimes a jury) determines liability and damages.

What Happens After a Successful Derivative Action?

If the shareholder prevails, the corporation, not the individual shareholder, receives the benefit of the judgment or settlement. However, the shareholder who brought the action may be entitled to reimbursement of attorneys’ fees and litigation expenses for taking the initiative to protect the company’s interests.

In some cases, the court may also impose corporate governance reforms to prevent similar misconduct in the future.

Why These Cases Require Skilled Legal Guidance

Shareholder derivative actions are among the most complex areas of business litigation. They require deep understanding of corporate law, fiduciary duties, and procedural rules unique to Florida’s statutes.

At Ayala Law, we regularly handle business and shareholder disputes, including derivative actions. Our attorneys understand both the legal and strategic sides of these cases, helping shareholders protect their investment while ensuring corporate accountability.

If you believe a company’s leadership has breached its fiduciary duties, contact one of our experienced business litigation attorneys in Miami at 305-570-2208.

You can also reach out directly to our founding attorney, Eduardo A. Maura, Esq., at eduardo@ayalalawpa.com.

Schedule a confidential case evaluation with Ayala Law online here.

[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case.]