Companies incorporated in California and other states sometimes find themselves in the unenviable position of facing a demand from a shareholder that the Company file a lawsuit against third parties or even the Company's own officers, directors, or employees. A Company need not cede to the shareholder's demand, but such a demand should not be ignored.

In many cases, the Company can find protection for itself and its investors through the formation of a special litigation committee. A special litigation committee, generally made up of directors and other individuals not accused of wrongdoing by the shareholder, is charged with investigating a shareholder's complaints. A properly appointed special litigation committee which performs adequate investigation of shareholder claims can ensure the best possible outcome for the Company. If the special litigation committee determines pursuit of a suggested lawsuit is warranted, the Company can take the required steps to initiate its own litigation. If the special committee determines the pursuit of a suggested lawsuit would not serve the Company or its shareholders, the shareholder will likely be unable to pursue a derivative complaint.

The specific laws applicable to your company will vary based on several factors, including your corporate form and the state of incorporation. NB will assist your company in navigating the complexities of the special litigation committee to ensure there are no missteps along the way which might expose the company or its officers and directors to unnecessary expenses or lawsuits. NB will help your company's special litigation committee make sure it maintains the required independence and does everything required by law to ensure that its investigation is thorough and complete. The end goal of any special litigation committee is to come to a conclusion that will stand up in court- NB will provide all the assistance required to make sure this happens.