Document Type

Article

Publication Date

2011

Abstract

Shareholder derivative litigation is a target of constant criticism within the United States (U.S.). Many scholars advocate for its abolition and others propose strict limitations on its use. If shareholder derivative litigation were universally disfavored, one would expect countries to be abandoning such litigation through legislative enactments or judicial rulings. Instead, many countries are expanding shareholder derivative litigation.

This Article compares the shareholder derivative action as developed in the U.S. with such actions in the United Kingdom, Canada, and Australia. The U.S. has the most recognized and frequent uses of shareholder derivative actions, whereas such actions are rare in the United Kingdom. Yet, the U.S., a former English colony, originally imported the shareholder derivative device and other aspects of its legal system from England. This Article compares the very different paths that shareholder derivative litigation has taken in these two countries. It specifically examines the significance of the United Kingdom’s recent transition to a statutorily-authorized shareholder derivative action that resembles such statutes in many U.S. states.

Similar to the U.S., Canada and Australia were once English colonies and their legal systems are also rooted in English legal traditions. Canada and Australia are also now authorizing shareholder derivative actions through adoption of laws comparable to those of many U.S. states. This Article considers the reasons prompting such changes and their potential ramifications. While critics of shareholder derivative litigation in the U.S. appear to have been largely ignored, other countries are adopting statutes that resemble those of many U.S. states. Scholars, courts, and legislatures in the U.S. must focus on reforming the perceived deficiencies of shareholder derivative actions to influence the future contours of such litigation globally.

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