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Simple English definitions for legal terms
derivative settlement
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A quick definition of derivative settlement:
Derivative settlement refers to the outcome of a legal agreement or court case, where parties involved come to a resolution. This can involve the transfer of property or money, the end of a dispute, or the execution of an estate. In some cases, a settlement may involve periodic payments over time, rather than a lump sum. Viatical settlements are a specific type of agreement where a terminally or chronically ill person sells their life insurance policy to a third party for a lump sum payment.
A more thorough explanation:
Derivative settlement is a type of settlement that is negotiated as an outcome of a derivative action. This means that it is a settlement that is reached in a legal case where a shareholder sues a company on behalf of the company itself. The settlement is negotiated between the shareholder and the company, and it usually involves some form of compensation or change in company policy.
For example, if a shareholder sues a company for mismanagement, the derivative settlement might involve the company agreeing to change its management practices or to compensate the shareholder for any losses they suffered as a result of the mismanagement.
Another example of derivative settlement is in the context of viatical settlements. This is a transaction where a terminally or chronically ill person sells the benefits of a life insurance policy to a third party in return for a lump-sum cash payment. The settlement is negotiated between the viator and the investor, and it usually involves the viator receiving a percentage of the policy's face value in exchange for the investor receiving the insurance benefit when the viator dies.
Overall, derivative settlement is a type of settlement that is negotiated in a legal case where a shareholder sues a company on behalf of the company itself or in the context of viatical settlements. It involves a negotiated outcome between the parties involved and usually involves some form of compensation or change in policy.