Can a judge dismiss a derivative action if not all shareholders are joined as defendants?

In a derivative action, a shareholder sues on behalf of the corporation to enforce a right that the corporation itself has failed to enforce. One key principle in these cases is the requirement to join necessary parties, which generally includes other shareholders who have a stake in the outcome of the case.

The accurate interpretation of the law states that if not all shareholders are joined as defendants, a judge cannot dismiss the action solely based on that factor. This is because the derivative nature of the action implies that the corporation is the real party in interest, and the other shareholders may have a right to participate, but their absence does not automatically invalidate the case. The derivative suit must be allowed to proceed as it is geared towards addressing grievances the corporation holds rather than the individual interests of shareholders directly.

In light of this, it is necessary for the judge to ensure that any dismissal does not prejudge the rights of all shareholders, as they might still be impacted by the outcome of the case. Therefore, not joining all shareholders does not necessarily lead to a mandatory dismissal, recognizing that the action is aimed at protecting the overarching interests of the corporation.