De jure convergence, de facto divergence: A comparison of factual implementation of shareholder derivative suit enforcement in the United States and the United Kingdom

Gibbs-Kneller, David and Gindis, David (2019) De jure convergence, de facto divergence: A comparison of factual implementation of shareholder derivative suit enforcement in the United States and the United Kingdom. European Business Law Review, 30 (6). pp. 909-930. ISSN 0959-6941

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Abstract

Many legal systems have been converging toward a US shareholder-centric model of corporate law and governance. This includes de jure rules relating to derivative enforcement. Despite convergence of the UK system towards the US model, each system continues to diverge as regards levels of shareholder enforcement. This article suggests that this divergence can be explained by the way the courts implement the derivative procedure de facto. A comparative assessment of de facto implementation in the US and the UK reveals that while courts in both systems are reluctant to interfere with the business judgment of the board, the US courts are willing to analyse whether board decisions were substantively reached, contributing to the levels of enforcement based on the way costs are allocated. Conversely, ingrained traditions of the UK courts place a high evidentiary burden on the shareholder, which they are unlikely to meet. Since costs are allocated to the loser in the UK, the factual implementation continues to serve as a strong disincentive for private shareholder enforcement and good governance.

Item Type: Article
Uncontrolled Keywords: company law,corporate governance,judiciary,directors,directors' duties,civil procedure,derivative claims,enforcement,costs
Faculty \ School: Faculty of Social Sciences > School of Law
Related URLs:
Depositing User: LivePure Connector
Date Deposited: 03 Sep 2019 11:30
Last Modified: 22 Jul 2020 23:38
URI: https://ueaeprints.uea.ac.uk/id/eprint/72092
DOI:

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