The Essence of a Derivative Action
A derivative action is defined in the Entrepreneurship Code: one or several shareholders have the right to bring an action in their own name and for the benefit of the joint stock company in order to enforce a claim belonging to the company, including against the officials of the company — with a demand for compensation of damage caused to the company by their non-performance of duties, for the transfer of profit received in return for the caused damage, or for the renunciation of the right to receive such profit. The derivative character lies precisely in this: the action is brought by the shareholder, but the claim belongs to the company and is enforced for its benefit. An analogous route is provided for limited liability companies as well: under the relevant article, where a partner brings an action for the benefit of the company, the rules of the derivative action apply. In this way the law protects the interests of the enterprise where the organs of the company themselves avoided or were unable to initiate a dispute against its officials.
The Appointment of a Special Auditor
An important instrument for preparing a derivative action is the special audit. Under the respective article, a joint stock company is obliged, upon the application of shareholders holding at least 5 percent of the shares and by a decision of the general meeting, to carry out a special audit of the economic activity of the company or of its annual financial statements, where it is not subject to a mandatory audit, and for this purpose appoints a special auditor. A shareholder whose interests the audit concerns has no voting right on that matter. Where the general meeting refuses to appoint an auditor for an activity after which no more than 5 years have passed, the court appoints the special auditor upon the application of shareholders holding at least 5 percent of the shares, if a substantiated suspicion of a gross violation of the law or the charter exists. The replacement of an auditor appointed by the meeting is also possible: an application to the court must be filed within 14 days from the date of the meeting where the auditor lacks qualification or doubt exists as to his or her impartiality. Where the court appoints the auditor, the company bears the court costs and the court-determined remuneration; the governing organ and the supervisory council must cooperate with the auditor, grant access to documentation, funds and inventories and provide all necessary information; the conclusions are drawn up in writing and published. Where the appointment rested on incorrect information deliberately or grossly negligently supplied by the applicants, they reimburse the company's costs.