List of tables
|
xiv |
List of contributors
|
xv |
Foreword
|
xvii |
Preface
|
xix |
List of abbreviations
|
xxi |
1 The derivative action: an economic, historical and practice-oriented approach
Harald Baum and Dan W. Puchniak
|
1 |
I Introduction
|
1 |
II The derivative action from an economic and functional perspective
|
7 |
1 Definition, characteristics and delimitation
|
7 |
a Definition
|
7 |
b Characteristics
|
8 |
c Delimitation
|
10 |
2 Economic efficiencies and inefficiencies
|
12 |
a Function
|
12 |
b Empirical studies on the derivative action’s compensatory value
|
15 |
c The comparative value of the empirical research
|
19 |
d The ambiguous empirical picture is compounded by the deterrence effect
|
23 |
e Illuminating the potential negative effects of derivative actions
|
26 |
3 Key elements of regulatory design
|
31 |
a The need for economic incentives and disincentives
|
31 |
b Designing appropriate economic incentives
|
35 |
c Sufficient access to corporate information
|
43 |
d Making the company the first option
|
46 |
e Filtering out unmeritorious actions
|
47 |
f Settlement and abandonment
|
58 |
4 The derivative action in context: functional alternatives
|
60 |
III The derivative action from a historical perspective
|
64 |
1 Historical development in the United States
|
64 |
2 Historical development in the United Kingdom
|
66 |
3 Germany’s historical rejection of the derivative action
|
72 |
IV The derivative action from a practical perspective
|
74 |
1 Procedure and practice in the United States
|
74 |
2 Procedure and practice in the United Kingdom
|
77 |
3 Procedure and practice in France
|
82 |
4 Procedure and practice in Germany
|
84 |
2 The complexity of derivative actions in Asia: an inconvenient truth
Dan W. Puchniak
|
90 |
I Introduction
|
90 |
II The seven leading Asian jurisdictions
|
98 |
III An overview of the derivative action in Asia
|
100 |
1 Japanese derivative actions: the rise of non-economic litigiousness
|
100 |
2 South Korean derivative actions: moderately litigious and intriguingly unpredictable
|
104 |
3 Taiwanese derivative actions: the chill of financial disincentives and domestic cultural norms
|
108 |
4 Chinese derivative actions: a complex pathway to minority shareholder protection
|
111 |
5 Hong Kong derivative actions: a late and partial break with common law tradition lays a path for reform
|
114 |
6 Singapore’s derivative actions: mundanely non-Asian, intriguingly non-American and at the forefront of the Commonwealth
|
117 |
7 Derivative actions in India: explaining the rarity of derivative actions in a sea of litigation
|
120 |
IV The complexity of derivative actions in Asia: a less convenient, but more realistic, truth
|
124 |
3 Land of the rising derivative action: revisiting irrationality to understand Japan’s unreluctant shareholder litigant
Masafumi Nakahigashi and Dan W. Puchniak
|
128 |
I Introduction
|
128 |
II Applying the assumption of the economically motivated and rational shareholder litigant to Japan
|
132 |
1 The economically motivated and rational explanation for the absence of shareholder litigation in postwar Japan
|
132 |
2 Japan’s explosion of derivative actions (mis)understood through the lens of the economically motivated and rational shareholder litigant and its testable hypotheses
|
139 |
III Putting the hypotheses of the economically motivated and rational Japanese derivative litigant to the test
|
144 |
1 Testing the economically motivated and rational shareholder hypothesis: do shareholders benefit financially from derivative actions in Japan?
|
144 |
2 Testing the economically motivated and rational attorney hypothesis: do economically motivated and rational attorneys drive derivative litigation in Japan?
|
150 |
3 Testing the financial tracking hypothesis: does the rate of derivative actions track changes in their financial costs/benefits?
|
155 |
IV Providing a rational explanation for ‘economically irrational’ derivative litigation in Japan
|
158 |
1 Demarcating the boundaries between rational and irrational behaviour
|
158 |
2 Quasi-rational (non-economically motivated) behaviour drives derivative litigation in Japan
|
160 |
3 Purely irrational behaviour as a potential driver of derivative litigation in Japan
|
163 |
V Conclusion
|
168 |
Appendices
|
170 |
4 Invigorating shareholder derivative actions in South Korea
Hyeok-Joon Rho and Kon-Sik Kim
|
186 |
I Introduction
|
186 |
II Basics of derivative actions: law and reality in South Korea
|
187 |
1 Background: the shareholding structure and the legal institutions for shareholder protection
|
187 |
a The shareholding structure
|
187 |
b Legal institutions for shareholder protection: shareholder direct suits and class actions
|
189 |
2 Overview of the structure of a derivative action
|
192 |
3 Some statistics and features
|
193 |
III Standing for plaintiffs
|
196 |
1 General shareholding requirement under the KCC
|
196 |
2 Double derivative actions
|
198 |
a Concept of a double derivative action and a recent Supreme Court case
|
198 |
b Analysis: why are double derivative actions necessary in South Korea?
|
199 |
IV Entrepreneurial lawyers: fees and incentives
|
200 |
1 Lack of shareholders’ incentives and the role of entrepreneurial lawyers in derivative actions
|
200 |
2 Who will pay the plaintiff’s lawyer?
|
201 |
3 How much will the plaintiff’s lawyer be paid?
|
203 |
a Limitation on contingency fees
|
203 |
b Limitation of directors’ liability
|
205 |
V Regulation of frivolous actions
|
206 |
1 Demand requirement
|
206 |
a Introduction
|
206 |
b A corporation’s decision not to sue
|
207 |
c A derivative action filed without going through the demand process
|
207 |
d Analysis
|
209 |
2 Limiting collusive settlements
|
210 |
VI A new trend in case law: digression from the passive role model?
|
211 |
VII Concluding remarks
|
213 |
Appendix
|
214 |
5 Derivative actions in Taiwan: legal and cultural hurdles with a glimmer of hope for the future
Wang Ruu Tseng and Wallace Wen Yeu Wang
|
215 |
I Introduction
|
215 |
II The legal mechanism for conducting a derivative action: requirements for maintaining a derivative action
|
216 |
1 The shareholder rules
|
219 |
2 The ‘continuing ownership’ rule
|
220 |
3 The ‘security for damages or costs’ rule
|
220 |
III The ambiguity of civil procedure in Taiwanese derivative actions
|
223 |
1 Notification of and intervening in a derivative action
|
224 |
2 Ambiguity in an involuntary decrease in a plaintiff’s shareholdings
|
225 |
3 The binding effect of settlements in derivative actions
|
227 |
4 Court fees in derivative actions: a flat rate or a percentage?
|
227 |
IV Derivative actions versus direct suits
|
228 |
V The relationship between culture, institutional background and the derivative action
|
230 |
1 The controlling shareholder system
|
230 |
2 Weak company code
|
231 |
3 Emphasis on criminal/administrative sanctions
|
233 |
4 Taiwan’s legal culture
|
233 |
5 Paternalism and mass dispute resolution: ‘Asian values’ after all?
|
234 |
VI The impact of the derivative action on corporate governance
|
235 |
VII The perception of the derivative action and professional services in the marketplace
|
237 |
VIII Idiosyncrasies in derivative actions: the role of the government-sanctioned non-profit organization
|
240 |
IX Concluding remarks
|
241 |
6 Pathway to minority shareholder protection: derivative actions in the People’s Republic of China
Donald C. Clarke and Nicholas C. Howson
|
243 |
I Introduction
|
243 |
II Economic and legal reform in the PRC and the derivative action
|
244 |
1 Introduction: the derivative lawsuit and corporate governance in the Chinese context
|
244 |
2 Corporatization and its effects
|
245 |
3 The LLC form and other non-Company-Law forms
|
249 |
4 The legal representative
|
253 |
5 The Chinese judiciary: local protectionism, Party control and the avoidance of ‘mass’ litigant cases
|
254 |
6 Derivative versus representative
|
257 |
7 Costs, cost allocation and cost–benefit analysis for shareholder plaintiffs
|
258 |
III Derivative actions before 2006
|
260 |
1 Non-statutory rule making: CSRC principles, SPC utterances, local ‘opinions’, and the (draft) ‘Omnibus’ regulation on the 1994 Company Law
|
260 |
2 Pre-2006 cases
|
263 |
a Genesis of the 1994 SPC Approving Response and other LLC cases
|
263 |
b Widely held companies
|
267 |
IV The 2006 Company Law and statutory authorization for derivative actions
|
269 |
1 Standing
|
270 |
2 Demand
|
272 |
3 Defendants and associated causes of action
|
273 |
V The reality of derivative actions in the PRC from 1 January 2006 to date
|
275 |
1 Absence of CLS or publicly listed CLS-related cases
|
275 |
2 ‘Straddling’ actions: 2006 Company Law application to pre-2006 transactions
|
278 |
3 Avoidance of derivative pleadings
|
279 |
4 Autonomy and acceptance
|
280 |
5 Technical competence
|
282 |
6 Difficulties regarding underlying substantive claims
|
284 |
7 Confusion between derivative and representative lawsuits
|
286 |
8 Judge-made direct litigation right for supervisors
|
286 |
9 Allocation of court fees and ‘loser pays all’
|
287 |
VI Critique of article 152 and reform suggestions
|
288 |
VII Conclusion
|
293 |
7 A parallel path to shareholder remedies: Hong Kong’s derivative actions
Paul von Nessen, S. H. Goo and Chee Keong Low
|
296 |
I Introduction
|
296 |
II The common law derivative action: Foss v. Harbottle and its exceptions
|
297 |
III The reform process in Hong Kong
|
304 |
1 The consultancy report
|
304 |
2 The report of the Standing Committee on Company Law Reform
|
305 |
3 The SCCLR corporate governance consultation paper (July 2001)
|
307 |
4 Companies (Amendments) Bill 2003
|
308 |
IV How successful is Hong Kong’s statutory derivative action?
|
310 |
1 The judicial pronouncements
|
311 |
2 Coexistence with the common law
|
315 |
3 Should Hong Kong adopt the British reforms?
|
319 |
4 Conclusions and observations on future success
|
321 |
8 Derivative actions in Singapore: mundanely non-Asian, intriguingly non-American and at the forefront of the Commonwealth
Meng Seng Wee and Dan W. Puchniak
|
323 |
I Introduction
|
323 |
II Law of minority protection
|
326 |
1 History and development
|
326 |
a English tradition and seeds of change
|
326 |
b Development of company law
|
328 |
c Evolution of minority protection law
|
330 |
2 Common law derivative action
|
331 |
a Introduction
|
331 |
b Critique
|
332 |
c Conclusion
|
336 |
3 Statutory derivative action
|
336 |
a Impetus for reform
|
336 |
b Scope
|
338 |
c The law
|
341 |
4 Personal right, corporate right and section 216
|
348 |
a Introduction
|
348 |
b Giving corporate relief under section 216
|
349 |
5 Conclusion
|
351 |
III Debunking Western stereotypes
|
351 |
1 Western stereotypes of Singapore
|
351 |
2 Realities
|
354 |
a The evolution of Singapore society and the concurrent rise in shareholder litigation
|
354 |
b Singapore’s shareholder litigation defies the ‘nanny state’ and ‘Asian values’ stereotypes
|
359 |
IV Intriguingly non-American in its success
|
365 |
9 The rarity of derivative actions in India: reasons and consequences
Vikramaditya Khanna and Umakanth Varottil
|
369 |
I Introduction
|
369 |
II Why have derivative actions?
|
371 |
1 The desirability of derivative suits to enforce corporate laws
|
371 |
2 Application to the Indian context
|
378 |
III The derivative action in India
|
380 |
1 Foss v. Harbottle and its exceptions
|
381 |
a Ultra vires transactions or illegality
|
382 |
b Matters requiring special resolution
|
382 |
c Fraud on the minority
|
382 |
2 Procedural constraints
|
383 |
a The ‘clean hands’ doctrine
|
384 |
b Order I, rule 8, Civil Procedure Code 1908
|
384 |
3 Availability of other remedies
|
386 |
a Oppression and mismanagement
|
386 |
b Securities laws and SEBI
|
388 |
4 Other constraints
|
390 |
a Directors’ duties
|
390 |
b Controlling shareholders’ duties
|
391 |
c Cultural concerns
|
392 |
d Costs
|
393 |
IV Recent developments and reform efforts
|
394 |
V Conclusions and recommendations for the future
|
396 |
10 The derivative action in Asia: some concluding observations
Dan W. Puchniak and Harald Baum
|
398 |
Legislative appendix
|
404 |
Bibliography
|
422 |
Index
|
443 |