Moreover, in cases of claims on the grounds of prohibited distribution, the legislature also allowed creditors to file an application for approval of a derivative claim (section 204 of the Companies Law). The reason for this is that in such cases, the potential indirect harms from the company's failure to file a lawsuit are the creditors (see also Tzipora Cohen, Shareholders in the Company – Suit Rights and Remedies , Vol. III, 490-492 (2nd ed., 2010) (hereinafter: "Tzipora Cohen – Volume C"). The indirect property interest in such cases is therefore their interest.
It should be noted in parentheses that even with regard to a similar institution of private enforcement, the institution of class action, the legislature insisted on the existence of a "property relationship" between the applicant and the plaintiff. In the context of a class action, this requirement is expressed in section 3 of the Class Actions Law, 5766-2006 (hereinafter: the "Class Actions Law"), by virtue of which the applicant is required to have a personal cause of action as a condition for being entitled to file a class action on behalf of a group of plaintiffs (subject to exceptions).
- At the same time, it seems that the harm to the company's property interest – and to the indirect property interest of its shareholders (and sometimes, its creditors) – is not the only reason for which the legislature allows a derivative claim to be filed. As stated above, another purpose of the institution of the derivative claim is to strengthen the deterrence against the violation of the law by increasing the chances that such a violation will be discovered and dealt with.
From an economic point of view, deterrence consists of two components: the first is the existence of sanctions in the event of a violation of the law and the degree of intensity of these sanctions; The second is the degree of probability of being "caught" and being held accountable in the event of a violation. The mechanism of a derivative claim as a private enforcement mechanism – which is added to the regulatory supervision and control mechanisms – contributes to increasing the probability that officers in companies who breach their obligations to the company and cause damages to it will be sued in connection with this and will have to compensate the company for those damages. In this way, the derivative lawsuit works to strengthen the deterrence of officers in companies against violating the law.