Shareholder Protection Reconsidered

This book examines the role and potential of derivative actions in shareholder protection in public limited companies. Derivative actions have been a focal point of legislators’ agendas on shareholder protection, in the past few decades, throughout Europe and beyond. Nevertheless, there remain jurisdictions, such as Greece, which are still devoid of this remedy. Against this backdrop, this book examines whether and how the derivative action may improve shareholder protection, constituting thus a mechanism that justifies legislative attention. It does so in three parts. First, it analyses the desirable role derivative actions assume in protecting shareholder property, monitoring corporate management and mitigating agency costs, alongside their economic implications, introducing the reader to the contemporary international debate on the topic. Having set the desiderata, the second part proceeds with the comparative analysis of Greek, German and UK law – jurisdictions that have recently reformed their provisions on shareholder protection – examining not only the law on derivative actions and their Greek counterpart remedy but also mechanisms of shareholder protection that do, or could, assume functions similar to those of the derivative action. By critically assessing the merits and failures of the respective UK, German and Greek shareholder protection laws, the book then proceeds to offer (in Part III) a model framework of shareholders’ derivative litigation for jurisdictions considering reform. Written in an accessible format, it will be an invaluable resource for anyone interested in this important aspect of company law and corporate governance.

This Article offers the first systematic attempt to measure the development of shareholder protection in the United States across time. Using three indices developed to measure the relative strength of shareholder protection across nations, we evaluate numerically the protections corporate and securities law have offered shareholders from the beginning of the twentieth century to the present day. We do so by tracking the rights accorded to shareholders across time under three important sources of corporate law, Delaware and Illinois and the Model Business Corporation Act.Our novel study yields novel results. First, we find that the protections afforded to shareholders by state corporation law have decreased since 1900 but only modestly so. This implies that, contrary to the assumptions of many scholars, state competition in corporate law has not significantly eroded shareholder rights. Second, when we add in measures that count protections provided by federal as well as state law, we find that shareholder protection improved across time. This implies that federal intervention has played a crucial and perhaps underappreciated role in shaping U.S. corporate law. Beyond its specific findings, this study illustrates how empirical analysis of legal trends provides scholars with a new means for analyzing and resolving fundamental questions in corporate law.

Close corporations, which are legal forms popular with small and medium enterprises, are crucial to every major economy's private sector. However, unlike their 'public' corporation counterparts, close corporation minority shareholders have limited exit options, and are structurally vulnerable in conflicts with majority or controlling shareholders. 'Withdrawal remedies'-legal mechanisms enabling aggrieved shareholders to exit companies with monetary claims-are potent minority shareholder protection mechanisms. This book critically examines the theory and operation of withdrawal remedies in four jurisdictions: the United States, the United Kingdom, Germany, and Japan. Developing and applying a theoretical and comparative framework to the analysis of these jurisdictions' withdrawal remedies, this book proposes a model withdrawal remedy that is potentially applicable to any jurisdiction. With its international, functional, and comparative analysis of withdrawal remedies, it challenges preconceptions about shareholder remedies and offers a methodology for comparative corporate law in both scholarship and practice.

La Porta, Lopez-de-Silanes, Shleifer and Vishny's Law and Finance, in particular its shareholder protection measures, have been heavily criticised from nearly every different standpoint, for example methodology, the choice of variables, the simplicity of the judgment or the disregard of board structures. Braendle was the first to move the critique forward by combining the wide range of objections to the index, whereas previous critiques had focused on separate objections only. Broadening the scope to encompass the range of objections he reconsidered the level of shareholder protection for Germany and the United States. The result was astonishing, after LLSVs score was reassessed and adjusted for differences between Civil and Common law in more detail. While the original score for Germany and the US was 0:5 and therefore suggested a very high level of shareholder protection in the latter, the reassessed score amounted to 4:4. This reconsideration as opposed to a single-tracked criticism challenged LLSVs thesis - which is seen as being so important throughout the legal, economic and political world - on a more profound level. This work accepts Braendle's invitation, introduces Law and Finance, summarizes and classifies the different objections made so far and finally reconsiders LLSVs shareholder protection measures for two further countries: Austria and the United Kingdom. The outcome is very similar to Braendle's work. The paper ends with three main conclusions: First and most important: LLSVs shareholder protection index is incorrect. The second conclusion drawn is that the differences between Common and Civil Law countries in shareholder protection are not as severe as suggested by Law and Finance. And third, research based on LLSVs shareholder protection index has to be reconsidered, because it rests upon inappropriate pre-requisites.