derivative loss (doctrine)

When a third party causes financial damage to a company due to a breach of contract or tort, the share The portion of registered capital of a private or public limited company
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shares
in this company may drop in value. The derivative loss doctrine refers to the indirect damage a shareholder suffers by this third party’s action. The damage lies in the depreciation of his shares.

In Dutch case law the question whether a shareholder has a personal right to claim compensation from the third party is repeatedly been raised. This third party can also a CEO who mismanaged the company. In contrary to other countries like the US and the UK, in the Netherlands a shareholder has in principle not a independent right to compensation. This right is reserved to the company itself. Only in extraordinary cases a shareholder can be awarded compensation. It is required then that the third party has specifically violated a standard of care towards the shareholder.

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