Shareholders rarely take action against directors in the UK
because doing so is difficult, expensive and requires investors
to show clearly illegal or fraudulent conduct by the board.
That might be about to change.
Under the Company Law Reform Bill, an overhaul of
legislation intended to promote shareholder participation and
clarify directors' responsibilities, shareholders will have a
mechanism to bring derivative actions against directors for
neglecting their duties.
The UK government appears surprised at the controversy that
has been generated by the prospect of increased shareholder
action. Less than a week after the bill was published, Alun
Michael, minister for industry and the regions, issued a
statement saying that the bill did not represent a major change
in the law and was not a move towards US-style class action by
Not everyone agrees. "The company law reform creates a
framework within which there will be litigation of...