Shareholder Derivative Suits: A Comparative Analysis and the Implications of the European Shareholders' Rights Directive.

The derivative action exerted by shareholders falls within the wider topic of the defence of shareholder minorities. Some empirical studies show that in listed companies there are no such lawsuits. Although modern limited companies are based on the majority rule, it is quite clear to everyone that such a rule can easily lead to discriminatory and iniquitous treatments of minority shareholders. As everyone knows, within the field of limited companies there are “closed” - and “open” - structured companies: this distinction is based on the level of shareholders’ external participation to the company management, reaching the highest and minimum level in closed-structure companies or limited companies and in open-structured companies or public companies, respectively. The more restricted the company’s structure the highest is shareholders’ interference with the management and, therefore, the lower the need for the defence of minority. In case, instead, of an extremely widespread shareholding (in terms of both capital fragmentation and physical distance amongst shareholders), a little group of shareholders controls the management although not representing the capital majority. This “physiological paradox” has urged the need for a deep reexamination of control power over management. According to the European Directive on the Cross-border Exercise of Shareholders’ Rights, effective shareholder control is a prerequisite to sound corporate governance and should, therefore, be facilitated and encouraged. But control power over management is usually based on “empty” procedures and frequently false meeting practices. The fundamental “hypocrisy” of corporate governance is due to different quality and quantity of information available for deeply different groups of people. From this point of view, the European Directive on Minority Rights (Directive 2007/36/EC) makes it easier to exercise some traditional rights. Of course, the introduction of these rights implements talks between the control group (reference managers and shareholders) and those who are usually excluded, increasing at the same time the so called frivolous claims. The problem is to find the right balance between opposed abuses and to fix the threshold as to the need for defence, which usually stands between the unit (each shareholder can take the initiative despite the owned capital) and the 5 % of the capital (which can be represented by the shareholder alone or by a group of shareholders). The European Directive made the choice to fix just a “top threshold” concerning (a) the right to put items on the agenda of the general meeting and (b) the right to table draft resolutions for it. Where any of the mentioned rights will be subject to the condition that the shareholder hold a minimum stake in the company, such minimum stake shall not exceed 5 % of the share capital. Therefore, in some cases, the shareholder’s position appears as assigning a kind of “veto power” to the individual, while in many other cases it is necessary that shareholders join up in order to exercise their own privileges and rights. There is a deep and unexplained vacuum between the so called “minority remedies” and the information rights. From this point of view, liability represents a typical remedy that corporate law assigns first of all to majority shareholders in order to obtain compensation for damages caused by managers to corporate assets. It is just a “reparatory” remedy and it is provided for in almost all national regulations as it is directly connected to the legal structure of the fiduciary contract between the company and the managers. Liability is also a deterrent: managers should be afraid of being sued for damages caused to the company by breaching the managerial mandate; then, they should behave fairly in the sole interest of the shareholders. So, in this work, I try to anwer to the question “why there are no shareholder derivative suits in Europe?”.