Direct and derivative shareholder suits : towards a functional and practical taxonomy

Abstract

Shareholder litigation is an indispensable part of corporate law and governance. There is no shortage of excellent legal scholarship on various aspects of shareholder litigation from a comparative and functional perspective. Well-executed scholarly writing on comparative shareholder litigation can be informative and even enlightening for students and scholars of comparative corporate law. The goal of this chapter is to offer a taxonomy of shareholder litigation mechanisms informed by considerations relevant to a minority shareholder’s decision whether and how to proceed with a lawsuit. The central questions guiding the exposition below are these: What substantive outcomes are possible for a minority shareholder litigant, and which of these can each mechanism be used to achieve? This chapter proceeds as follows. Section 2 sets out four key considerations relevant to litigators that shape our discussion in subsequent parts. Section 3 classifies direct shareholder litigation mechanisms functionally according to whether the desired outcome is a monetary or non-monetary one. Section 4 addresses derivative litigation. Section 5 concludes.