How is a shareholder allowed to sue the company?
<p>There are news about shareholders suing VW due to the losses that happened by the emissions fraud (lots of examples in the news, <a href="https://www.ft.com/content/185c4086-bb9f-11e5-bf7e-8a339b6f2164" rel="noreferrer">this is just one of them</a>).</p>

<p>Now, I understand customers suing VW, and I would understand shareholders suing the CEO, the CTO, the entire board or any combination of them, and other managers implicated in the issue. That part is clear.</p>

<p>But, since the company is owned by the shareholders, suing the company does not make a lot of sense to me, because:</p>

<ul>
<li><p>Conceptually it is a lot like someone suing himself (yes I know the companies are different legal persons, but still); one could argue that the shareholders did benefit from the fraud while it was ongoing yet no customer can sue them.</p></li>
<li><p>Any damages they take away from the company will decrease the value of the company, thus decreasing the value of their stock. Add to that the legal costs from both parts and the most probable result will be a considerable net loss.</p></li>
</ul>

<p>Add to that the additional negative info for VW due to the lawsuit and it sounds a lot like using a gun to kill that fly that is on your hand...</p>

<p>The only possible explanaitions that I may think of do not sound very smart:</p>

<ul>
<li><p>They hope that only a handful of stockholders will sue, so the damages paid to 10% of the stockholders will be diluted between the 100% of the stockholders... but once there is a sentence against VW, I would think almost all of the small stockholders would join any action class lawsuit.</p></li>
<li><p>They hope to get to a situation were they get the money and VW gets in enough of a bad shape that forces the German government to bail-out.</p></li>
</ul>

<p>I don't know, the situation seems strange to me. Are there legal precedents of shareholder suing the company (not its management) before?</p>

<p>Update: To (hopefully) explain my doubts... If I buy a VW car and find it is not what I was promised, I can sue VW (the company) because I have a <strong>contractual</strong> relationship with it and the contract has not been honored. But a shareholder will have an <strong>ownership</strong> relationship with the corporation, which is what makes me doubt the possibilities of such a lawsuit<sup>1</sup>. And of course, there is always the -very, very, very tiny, almost non-existent - possibility that journalists are not reporting the issue correctly.</p>

<p><sup>1</sup>Of course the individual members of the board and employees that failed in their <strong>fiduciary duty</strong> may be sued, but they are not the corporation.</p>

<p>There is certainly precedent. This <a href="https://www.hcalawyers.com.au/blog/the-10-largest-class-action-lawsuits-in-australia-and-the-world/" rel="noreferrer">list</a> of the 10 biggest class action lawsuits in the world indicates that 8 of the 10 were by investors against their own company.</p>

<p>In any event your analysis is flawed. The people who initiate the class action may (probably are) no longer be investors because they sold their shares and realised their losses. Further a legacy investor who didn't buy on the basis of the company's wrongdoing would not be entitled to damages. Finally, an investor who bought at say $100 on the basis of false information (like the cars were legal when the company knew they weren't) and now hold shares worth $40 will wait many years (if ever) to make good their losses: a lawsuit will be quicker and more certain.</p>

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