The Shareholder Derivative Action according to § 148 of the German Stock Corporation Act: Incentives of Current Law and Proposals for Reform (Die Aktionärsklage nach § 148 AktG – Anreizwirkungen de lege lata und Reformanregungen de lege ferenda –)

Abstract

In Germany, the shareholder derivative action was adopted by the Corporate Integrity and Rescission Law Modernisation Act (Gesetz zur Unternehmensintegrität und Modernisierung des Anfechtungsrechts – UMAG) in the year of 2005. Contrary to the legislator’s expectations the provisions of §§ 148 et seq. of the Stock Corporation Act (Aktiengesetz – AktG) have turned out to be effectively meaningless, and are thus still mere “law on the books”. In a first step, this article searches for answers why this is so. It comes to the conclusion that the shareholder derivative action in its present form lacks sufficient incentives to spur shareholder activity. Compounding this, the legislator overstated the danger of non-meritorious strike suits. Drawing on these findings, the article asks in a second step how a reform of the present legal regime should look like in order to transform the German shareholder derivative action into an effective corporate governance device. Since a mere lowering of procedural hurdles is deemed to be insufficient to achieve this goal, an improvement of the shareholders’ incentives to sue in meritorious cases is asked for. Therefore, it is proposed to empower the court to grant a share of the damages awarded to the corporation as a premium to the shareholder who sued on its behalf.

Note: Downloadable document is in German.

Keywords: derivative action, litigation incentives, shareholder litigation, stock corporation

JEL Classification: G38, K22, K41