From great expectations to an even greater failure - the case of Montenegrin regulatory framework on shareholder derivative suits as an incentive for rethinking the concept itself

• Main Author: Vladimir Savković
• Format: Article
• Language: English
• Published: Bucharest University of Economic Studies 2016-12-01
• Series: Juridical Tribune
• Subjects: shareholder derivative suits; Montenegrin regulatory framework; legislator; first agency problem; incentives; inherent flaw
• Online Access: http://tribunajuridica.eu/arhiva/An6v22/1%20Savkovic.pdf
• ISSN: 2247-7195; 2248-0382

The author utilizes a case study of Montenegrin regulatory concept of shareholder derivative suits in order to demonstrate, by comparing its features with such concepts in other legal systems and features marked as favorable factors in legal theory, that its failure, as well as the failure of derivative suits in other countries cannot be a priori considered as result of inadequate approach of the legislator. Along with some other important legal systems, shareholder derivative litigation in United States is also analyzed, since its track record shows that it is virtually the single at least relatively successful system of derivative suits so far. This analysis is made so as to distinguish the particular and in many ways unique features of the shareholder derivative litigation concept in United States that enabled the relative success of it. As result of the research conducted and analyses made, the author argues that there is an inherent flaw in the very foundation of the concept of shareholder derivative suits, which generally hinders the use of this legal mechanism. Finally, the author finds that this flaw is deeply rooted in what is known today in theory of company law as the first agency problem.