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Derivative Actions and Corporate Governance$
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Arad Reisberg

Print publication date: 2007

Print ISBN-13: 9780199204892

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199204892.001.0001

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The Difficulties with Conferring Rights on Shareholders to Litigate

The Difficulties with Conferring Rights on Shareholders to Litigate

Chapter:
(p.76) 3 The Difficulties with Conferring Rights on Shareholders to Litigate
Source:
Derivative Actions and Corporate Governance
Author(s):

Arad Reisberg

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199204892.003.0004

This chapter inquires into the particular difficulties minority shareholders face where they seek redress against wrongdoing directors. Section 3.2 discusses these problems and Section 3.3 outlines the common law responses to these problems. Through extensive discussion of case law and emerging so-called principles and rules this section illustrates how procedurally and substantively English law has developed to provide disincentives to prospective shareholder claimants in this context. Subsequently, two policy responses are analysed. First, Section 3.4.1 examines and assesses the competence of three alternative bodies which may assess the merits of a derivative action: a committee of independent directors, an ‘independent organ’ of the company, and the courts. It concludes that courts should discharge the task of deciding this critical question. Section 3.4.2 explains that once a gatekeeper is put in place, the focus should be on establishing an expeditious means for screening and dismissing non-meritorious cases. It evaluates how well (or rather, badly) current legal screens work.

Keywords:   policy, common law, standing, rules, shareholder claimants, gatekeeper, independent organ, courts, committee of independent directors

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