Legal Question in Business Law in California

Re: What is a stockholder's derivitive action?

A derivative action is a lawsuit filed by a stockholder or group of stockholders not on their own behalf, but on behalf of the corporation, because the directors have failed to pursue remedies to which the corporation is entitled. This is often necessary because the directors have their own fingers in the pie.

There seem to be mutual water companies and also nonprofit mutual benefit corporations, the first provided for by the Public Utilities Code and the latter by the Corporations Code. Which are you? It seems not to matter, derivative suits can be brought against either.

Removal of directors is straightforward. See Corp. Code section 7222 for NBMCs, for example.

Re: What is a stockholder's derivitive action?

In very general terms it is a lawsuit filed by a stockholder alleging some improper conduct by corporate officers or directors that harmed the corporation. Details can be found in the corporations code as well as associated case law.