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

Author:Vladimir Savkovic
Position:University of Montenegro, Faculty of Law
Pages:7-21
SUMMARY

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 ... (see full summary)

 
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PROCEEDINGS SUBMITTED TO 6TH INTERNATIONAL
CONFERENCE “PERSPECTIVES OF BUSINESS LAW
IN THE THIRD MILLENNIUM”, 25 -26 NOVEMBER 2016,
THE BUCHAREST UNIVERSITY OF ECONOMIC STUDIES,
BUCHAREST, ROMANIA
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
1
Associate Professor Vladimir SAVKOVIĆ
2
Abstrac t
The auth or utili zes a case study of Montenegri n regulat ory concep t of shareho lder
deriva tive su its in o rder to demonstrate, by comparin g its feat ures with such con cepts in
other leg al systems and features mark ed as favorab le factors in lega l theory, that its
failure, as well a s th e failure of derivati ve suit s in other count ries can not be a priori
consid ered as result of inadeq uate approa ch of t he leg islator. Along with some o ther
importa nt legal systems, shareho lder derivative litiga tion in United Stat es is also analyze d,
since its tra ck record shows that it i s virtu ally the sin gle at lea st rela tively successful
system of derivati ve suits so far. This a nalysis is made so a s to di stinguish the pa rticular
and in many wa ys unique features o f the sh areholder derivat ive litig ation concept in United
Stat es t hat enabled t he relative succe ss of it. As result of t he resea rch co nducted and
anal yses made, th e autho r argues t hat the re is an inherent flaw in the very foun dation of
the concep t of shareh older deri vative su its, which generally hinders the use of this le gal
mechani sm. Fina lly, the aut hor finds tha t this flaw is deepl y rooted in wh at is known today
in the ory of company law as t he first agen cy problem.
Keywords: shareho lder deri vative suits; Mo ntenegrin regulato ry framework;
legisl ator; first agency pro blem; incentives, in herent flaw
JEL Cla ssification: K22
1. Introduction
A. Agency Problems and Derivative Suits as Suggested Solution
From the historical point of view, shareholder derivative suits had emerged
as one of the earliest mechanisms used to resolve the first agency problem -
conflict between the owners of a company and the appointed mangers, i.e.
1
This article was submitt ed to 6th International Conference “P erspectives of Bus iness Law in the
Third M illennium”, 25 -26 November 2016, the Bucharest University of Economic Studies,
Bucharest, Romania.
2
Vladimir Savković - University of Montenegro, Faculty of Law, vsavkovic@t-com.me

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