The unconvincing rise of the statutory derivative action in Hong Kong: Evidence from its first 10 years of enforcement

In this article the performance of the Statutory Derivative Action (SDA) in Hong Kong is investigated for the period 2005 to 2014. Although in this period the SDA and the common law derivative action coexisted under the same regime, the SDA became the preferred remedy. The SDA’s requirement for leave of court proved more benign than expected in terms of the number of applications approved by the courts and indemnity orders granted covering the applicant’s legal costs. But serious shortcomings in the SDA have persisted. No indemnity orders were granted regarding the costs of SDA substantive litigation. Nor was a single case observed where the plaintiff ended up winning the SDA litigation and obtaining relief. These limits cast serious doubt on whether the SDA has thus far meaningfully performed its core functions in regard to compensating corporate harm and deterring future misconduct.