Comments On The Purpose And Spirit Of Derivative Actions

A derivative action allows a shareholder to bring an action on behalf of the corporation. The shareholder effectively "stands in the shoes" of the corporation and prosecutes the action when management of the corporation refuses to do so.

In 1719349 Alberta Ltd v 1824766 Alberta Ltd, 2023 ABKB 207 (171 v 182), the Alberta Court of King's Bench confirmed that courts must be careful not to inappropriately interfere in the management of companies when analyzing a director's decision and deciding whether a derivative action is in the interests of the corporation. This stems from the business judgment rule, which suggests that courts should grant deference to decisions made by directors because directors are often best suited to determine what is the interests of the corporation. In line with this rule, courts should not allow a derivative action to proceed if it arises from a director's decision that falls within the range of reasonable alternatives accessible to the