Empirical analysis of the statutory derivative claim: de facto application and the sine quibus non

David Gibbs-Kneller, Chidiebere Ogbonnaya

Research output: Contribution to journalArticle

2 Citations (Scopus)
16 Downloads (Pure)

Abstract

This article empirically investigates how the statutory derivative procedure is being applied de facto in comparison with the equitable procedure. Agency theory supposes that the corporate purpose is to maximise the value of the company by approximating the ‘efficient contract’ between the shareholders and directors. The derivative claim is one such way of doing so. However, an intractable tension exists between too much and too little litigation where there are inadequate private incentives relative to the corporate purpose. The equitable procedure did not incentivise litigation. The concern of the statutory reform was that an accessible procedure would create inadequate private incentives for shareholders to litigate. We do not find evidence that the statutory procedure is more accessible. We observed what we call the sine quibus non for permission. Shareholders are unlikely to meet these, creating little incentive to litigate and directors will continue to be incentivised to deter litigation.
Original languageEnglish
Pages (from-to)303-332
Number of pages30
JournalJournal of Corporate Law Studies
Volume19
Issue number2
Early online date26 Oct 2018
DOIs
Publication statusPublished - 2019

Keywords

  • Derivative Claims
  • Shareholders
  • Directors
  • shareholders
  • directors’ duties
  • Derivative claims
  • directors
  • shareholder rights

Cite this