Funding Derivative Actions: Costs and Fees as Incentives to Commence Litigation - Is it a Viable Option to Reduce Shareholder Passivity?
15 Pages Posted: 1 May 2010
Date Written: May 1, 2010
Corporate culture being the emerging powerful non-state actor requires to keep itself in checks. The study of corporate governance is supposed to take care of that aspect. Derivative action is one of the instruments, which is believed to deal with the passivity of shareholder. This passivity is one of the major problems of outsider‟s model of corporate governance where shareholders resort to vote by feet instead of taking up enforcement of corporate accountability in their own hands through litigation. The paper deals with analysis of the funding of derivative action as an incentive for instituting such action. The researcher will furthermore delve in the question of costs vs. incentive analysis involved in the funding of derivative action. Moreover, the paper will endeavour to determine if it is a feasible option to enhance the corporate governance in the country.
Keywords: Corporate Governance, Derivative Action, Shareholder Passivity, Indemnity Cost, Common Fund and Substantial Benefit Theory
JEL Classification: K22
Suggested Citation: Suggested Citation