Corporate legal relations in Ukraine are in constant evolution and improvement. Current procedural legislation tries to keep up with these relations and “lend a shoulder” when a need arises to protect the rights of members (shareholders, owners). It is generally known that in 2015 the Code of Economic Procedure of Ukraine was amended with a provision enabling shareholders (members, founders, owners) of a legal entity to file lawsuits in seeking protection of the interests of this legal entity in cases when management (management body granted this right by law) avoids filing a lawsuit against the person who caused losses to this legal entity. However, not all of the main elements of these legal relations are clearly and uniformly established by law and confirmed by judicial practice.

The article aims at studying the derivative action as a method of protection in economic proceedings, at identifying the gaps in its regulation and developing proposals for improvement of economic procedure legislation on this issue.

The author identifies and systematizes the characteristics of derivative action.

The author demonstrates that at the legislative level the legal structure of derivative action has not yet been finalized, and some issues are being resolved at the level of judicial practice. In general terms, derivative action may be defined as the right of shareholders and (or) members of a legal entity to take legal recourse on behalf of and in the interests of such a legal entity demanding that an official reimburse thelosses caused by his/her actions or omissions, including after the powers of such an official are terminated.

Although the structure of derivative action appears to be a very efficient measure to protect the rights of owners (shareholders, members) of a legal entity, however, it should be recognized that the legislative array contains some shortcomings and inconsistencies which the legislator needs to eliminate as soon as possible.

The author substantiates the expediency of ensuring that the Code of Economic Procedure of Ukraine provides for a clear definition of the right to file derivative actions granted to owners (members, shareholders) who collectively own 10 or more percent of a legal entity’s authorized capital.

In conclusion the author maintains that in assessing the actions of legal entity’s officials as misconduct which caused damage to the legal entity concerned, economic courts should bear in mind that at the moment of considering such an economic case, the official may no longer be an official of the plaintiff, however, he/she held a relevant executive position at the time of entering into a contested transaction and his/her actions determined whether the transaction would or would not be concluded. This should be reflected in a procedural law which will eliminate possible abuse by the parties to the process, as well as possible variance of interpretation of these provisions by courts of law.

Bibliography

Authored books

1. Tuzov D, Iski, svjazannye s nedejstvitel’nost’ju sdelok. Teoreticheskij ocherk [The Lawsuits Related to Invalidity of Transactions. Theoretical Essay] (Peleng 1998) (in Russian).

Journal articles

2. Eliseev N, ‘Processual’nyj status akcionernogo obshhestva v proizvodstve po kosvennomu isku’ [‘The Procedural Status of Joint-Stock Company in a Procedure by a Derivative Lawsuit’] (2005) 8 Vestnik VAS RF 161–70 (in Russian).

3. Gros’ L, ‘Vlijanie norm material’nogo prava na opredelenie nadlezhashhih storon v grazhdanskom dele’ [‘The Influence of Rules of Material Law on the Determination of the Proper Parties of the Civil Case’] (1999) 4 Pravovedenie 35–52 (in Russian).

4. Gureev V, ‘Processual’nyj status akcionernogo obshhestva v kosvennom iske’ [‘The Procedural Status of Joint-Stock Company in a Derivative Lawsuit’] (2007) 1 Zakonodatel’stvo 33–6 (in Russian).

5. Hudima T ta Herasymenko N, ‘Perspektyvy pravovoho rehuliuvannia pokhidnoho pozovu v Ukraini’ [‘Prospects of Legal Regulation of the Derivative Action in Ukraine’] (2016) 3 Ekonomika ta pravo 142 (in Ukrainian).

6. Jarkov V, ‘Osobennosti rassmotrenija del po kosvennym iskam’ [‘Special Features of Consideration of Cases by Derivative Lawsuits’] (2000) 11 Jurist 6–12 (in Russian).

7. Osokina G, ‘Ponjatie, vidy i osnovanija zakonnogo predstavitel’stva’ [‘The Concept, Types and Grounds of Legal Representation’] (1998) 1 Rossijskaja justicija 43–4 (in Russian).

8. Smirnov H, ‘Pokhidnyi pozov: osoblyvosti ta problemy pravovoho rehuliuvannia v Ukraini’ [‘The Derivative Lawsuit: the Special Features and Problems of Legal Regulation in Ukraine’] (2019) 6 Pidpryiemnytstvo, hospodarstvo i pravo 50 (in Ukrainian).

9. Talykin Ye, ‘Pokhidnyi pozov u hospodarskomu sudochynstvi Ukrainy: zahalni zasady protsesualnoi konstruktsii’ [‘The Derivative Lawsuit in Economic Litigation of Ukraine: the General Principles of Procedural Construction’] (2014) 4 Yurydychnyi visnyk 161–68 (in Ukrainian).

Newspaper articles

10. Chernyshov G, ‘Kto otvetit po kosvennomu isku?’ [‘Who is Liable for Derivative Lawsuit’] (2006) 5 JeZh–Jurist (in Russian).

Theses

11. Chugunova E, ‘Proizvodnye iski v grazhdanskom i arbitrazhnom processe’ [‘The Derivative Lawsuits in Civil and Arbitral Procedure’] (avtoref dis kand jurid nauk, 2003) (in Russian).