The Enforcement of Directors’ Duties in Britain and Germany: A Comparative Study with Particular Reference to Large Companies

The power to control litigation in the company's name is normally vested in the board of directors. This gives rise to a conflict of interest whenever some or all of the directors breach their duties. In such a situation, the board's decision whether or not to litigate is potentially tainted because the wrongdoers are part of the decision-making process. The board as a whole is therefore an unsuitable decision-making body and the following question arises: who should decide whether it is in the company's interest to initiate litigation against the alleged wrongdoers? There are a number of different persons and bodies in which the decision-making power could be vested. The British approach is the reversion of management power to the shareholders in general meeting and, in certain restricted situations, the availability of the derivative action brought by a shareholder on behalf of the company. Both mechanisms give rise to significant difficulties.
This book begins by explaining the board's conflict of interest, sets out a theoretical framework of legal strategies that cover the whole range of approaches to deal with it and analyses their strengths and weaknesses. The analysis consists of an assessment and comparison of four models of the enforcement of directors' duties, which are based on the current law and reform proposals in Britain and Germany. Particular reference is made to recent case law and its practical implications.

The Author: Hans C. Hirt obtained his Ph.D. from the London School of Economics where he was a Wedderburn Scholar after gaining an LL M at the University of Glasgow and also has a BA Honours in European Business Administration and is a Diplom-Betriebswirt (FH). His main research interests are in corporate governance, European company law and shareholder remedies and he has published a number of articles and notes in leading corporate law journals. He is now a trainee solicitor with the leading law firm Ashurst Morris Crisp.