Litigation by Shareholders and Directors: An Empirical Study of the Australian Statutory Derivative Action

Abstract

A number of countries have statutory derivative actions. They allow a shareholder to bring legal action on behalf of the company, typically where the company refuses or is unable to bring the action. The Australian derivative action was enacted in March 2000 to overcome inadequacies with the common law derivative action. In this article the authors present the results of an empirical study of all cases decided under the Australian statutory derivative action during its first 6 years of operation. The study provides insights into the way Australian courts have interpreted and applied this legal remedy. The authors evaluate the statutory derivative action in light of the reasons for its enactment. Issues discussed in the article include the role of shareholder litigation in corporate governance and the rationale for statutory derivative actions.