Where a disgruntled shareholder finds a willing attorney (or vice versa in some cases), the result is a demand upon the company to file a lawsuit against certain officers and directors.  Many times this demand is made only to satisfy a legal requirement before filing a Shareholder Derivative Lawsuit.

The company and the directors and officers targeted by the demand have several options.  One powerful option is to appoint a special litigation committee ("SLC").  A SLC is typically made up of two or more disinterested or independent directors.  Where an entire board of directors is the target of the shareholder derivative allegations, the board may appoint new directors to form the SLC.

The SLC is tasked with investigating the allegations made by the shareholders against the targeted officers and directors.  Upon completing the investigation, the SLC must determine if it is in the best interest of the company to pursue the claims against the officers and directors.  If the SLC determines that it is not in the best interest of the company to pursue the lawsuit, then such decision can operate as a complete defense to the Shareholder Derivative Lawsuit.