Understanding the Doctrine of Adverse Domination in Corporate Law
Definition & Meaning
The doctrine of adverse domination is a legal principle that allows a corporation to delay filing a lawsuit against its directors and officers. This delay occurs until those individuals no longer control the corporation. Essentially, it recognizes that corporate leaders are unlikely to initiate legal action against themselves, especially when their actions are being questioned. This doctrine has become increasingly relevant in cases involving insolvent financial institutions, where the corporation may seek to hold its leaders accountable for alleged wrongdoing.
Legal Use & context
This doctrine is primarily used in corporate law, particularly in cases involving claims against directors and officers. It is relevant in civil litigation where a corporation seeks to address potential misconduct by its leaders. Users may find it beneficial to utilize legal forms and templates provided by US Legal Forms to navigate these situations effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A corporation discovers that its CEO has been misappropriating funds. The board of directors, which includes the CEO, is unable to take action against him. Under the doctrine of adverse domination, the corporation can delay legal action until the CEO is no longer in control.
Example 2: A financial institution faces insolvency, and its directors are accused of negligence. The institution can invoke the doctrine to postpone any claims against the directors until they are no longer in power. (hypothetical example)