| A shareholder derivative action is a civil lawsuit filed by shareholders on behalf of a corporation asserting rights of the corporation in the absence of corporate action to protect such rights. It is a suit by shareholders to enforce corporate rights against directors or other insiders. The standing of shareholders to sue is derived from the fights of the corporation, and thus actions of this kind are called "derivative actions".Originated in the equity of common law in the 19th century, shareholder derivative action has evolved into a mature and effective system of its own, which affords adequate and sufficient remedy for companies and shareholders injured by wrongdoers' behaviors.Acco.rding to the traditional company theory of common law, as a separate legal entity, once established, a company will be separated from the shareholders' properties. The obligation of a shareholder is limited to the shares he or she holds, while the right of management and operation is endowed to directors andmanagers. The directors and managers own the duty of care and fiduciary duty to the company, but they are not responsible directly to shareholders. During the day-to-day operation of the company, the shareholders' ability to challenge the decision of directors is hampered by "Business Judgment Rule".Common law provides several protections and remedies for the shareholders,whose rights and interests are inj ured by wrongdoing．Shareholder personal action and shareholder derivative action are different in nature and in other aspects．If a shareholder is injured directly by the company,directors or controlling shareholders,he may file a shareholder personal action in a common law court．But in some cases,the wrongdoers do not inj ure the shareholders directly,and the wrong is only done to the company,according to the traditional company law,shareholders cannot sue the wrongdoers in that there is no lega,1 relationship between shareholders and wrongdoers．Shareholders may ask the company to sue the wrongdoers,of course．But the company will possibly decline the request if the company is controlled by the wrongdoers．By allowing shareholders to sue wrongdoers in a court of equity,shareholder derivative action provides a sufficient remedy to the shareholders under such circumstance．This kind of action is an innovation to the traditional attitude 0f common law court．In the past,equity courts of England had been sticking to the"Proper Plaintiff Rule''and "Majority Rule''developed from Foss V Harbottle:only the company is deemed the proper plaintiff in the courts when a wrong is done to the company,and the will of majority shareholders prevails．Later,those rules became'more flexible；several exceptions were created and corresponding procedures were introduced．The equity courts in America also take a cautious attitude towards sharehold- ers'right to sue wrongdoers．Different from the English way,American courts did not create certain rules to limit shareholders ability to sue the wrongdo- ersj but in fact,they respect the business judgments of directors more than English courts do．The limitation is reflected in the''Contemporary Ownership Rule"and''Rule of Exhausting Remedy in the Company"．The procedures of action are different from those of English courts．Derived from the law of equity,shareholder derivative action is also adopted by several civil law countries and areas,including Germany,France,Japan and Chinese Taiwan．The basic structure of the action of civil law is almost the same as that of English and American law,but some of the details carry their own characteristics．For example,a shareholder must hold stipulated amountof shares to be a proper plaintiff．For another example,the company is treated as a third party without separate claim,which is different from the American and English way．Short of shareholder derivative action,Chinese company law and related laws are insufficient to provide remedies for shareholders,especially minority shareholders．As a powe... |
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