Companies have a responsibility to make decisions that are in the best interests of their shareholders. When they neglect this duty, or when they outright defraud their shareholders, lawyers specializing in securities and shareholder actions may be called to represent investors who want to file suit.
According to Cornerstone Research, one in about eleven S&P companies was sued in 2018, and the “the likelihood of litigation involving a core filing for U.S. exchange-listed companies was greater than in any previous year.” Companies are obligated to inform shareholders when they have information that can impact the share price—and when they don’t, problems arise.
Securities and shareholder actions usually end up as class action suits due to the sheer number of shareholders. While this can streamline the process for the courts, class action suits can hamper a lawyer‘s ability to maintain operations and market for future clients.
A corporation may have a large number of investors, especially if it is publicly traded. In the event of alleged corporate wrongdoing, the large pool of potential plaintiffs can mean the potential for sizeable damages.
Although the facts and law at issue in these cases vary considerably, many share common characteristics:
Discovery requested in securities and shareholder litigation often seeks documents and records the corporation deems confidential. As a result, the parties may use significant resources litigating the discoverability of such records. Firms engaging in this kind of litigation need to be able to accommodate these unique litigation dynamics.
Conventional financing methods set strict terms on how the capital received may be used and may require personal guarantees from one or more senior members of the firm. The financed amount is reflected on the firm’s balance sheet until it is paid in full, regardless of whether the case resolves favorably.
Law firm funding provides a flexible financing alternative to conventional funding methods. This form of financing helps law firms meet the rigorous demands of representing securities and shareholder clients without negatively impacting firm balance sheets. Terms are tailored to each firm’s circumstances, and the firm remains in charge of both directing the course of the litigation and allocating the capital.
Here are some frequently asked questions:
Q. How much will it cost to get funding for a securities and shareholder action case?
A. Often more affordable than other forms of financing, the rates and terms of each fund agreement are created individually.
Q. What does my firm need to offer as collateral?
A. The cases you’ve taken on are underwritten to determine their likelihood of success and to serve as collateral. Additionally, the funding is non-recourse.
Q. At what point in the case should I apply?
A. That depends on when you need the funds. Once the case is established or, in class actions, certified to proceed, you can apply whenever you need the funds