3 reasons shareholders may feel compelled to sue an organization.

Shareholders have a vested interest in a particular company’s success and ongoing profitability. They generally want to see the company thrive partially because they will receive dividends based on the income the organization generates. Therefore, reducing expenses and increasing market share are often top priorities for shareholders who are concerned about the future of a company’s operations.

Sometimes, shareholders feel compelled to take actions that seem counterintuitive to outside observers. Shareholders may file a lawsuit against the organization. Doing so will potentially force the company to spend money on responding to the lawsuit, which could lead to a short-term reduction in what shareholders receive as dividends. Why would someone invested in an organization decide to participate in a lawsuit that would potentially undermine returns on their investment?

  1. They want to change leadership or prevent a business move

Perhaps shareholders attempted a vote of no confidence, but the company has refused to take appropriate action. Maybe there are signs that leadership at the company will soon conduct a transaction that would likely undermine the company’s financial stability or profitability. Shareholder lawsuits often stem from a desire to prevent damage to the company or force changes when someone has already actively harmed the organization through incompetence or corruption.

  1. They have not received dividends recently

Sometimes, those in executive roles or with a larger stake in the company will seek to force shareholders to sell their interest in the business. Delaying dividend payments or finding questionable reasons to refuse to make such payments is a common tactic. Those who do not receive a return on their investment might decide to sell their shares in the company to reinvest those funds elsewhere where they will not have to worry about such conduct. Other times, shareholders recognize that delayed or denied payments, possibly due to the manipulation of financial statements, is a violation of their rights, and they would rather fight back than accept that misconduct.

  1. They have not had access to meetings or voting opportunities

Sometimes a company will deny certain shareholders access to meetings or hold meetings with other, select shareholders behind closed doors. In a scenario in which a shareholder has been denied their say in an organization’s operations and information about its current performance due to such misconduct, they may want to pursue a lawsuit to force the company to allow them access and an opportunity to give input.

Recognizing that there are legitimate reasons for those with a vested interest in a company to take legal action against it may help shareholders find the motivation they need to speak up about their mistreatment by an organization in which they have invested.

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