We address one of the cardinal puzzles of European corporate law: the lack of derivate shareholder suits. In the vast majority of European jurisdictions, shareholders can bring a derivative action (for damages) against the management for breach of fiduciary duty. In spite of corporate fraud by managers there are no such lawsuits. We explain this apparent paradox on the basis of percentage limits which require shareholders to hold a minimum amount of shares (typically 5% to 10%) in order to bring an action. In a four-stage-model, we show that, given the current percentage limits, managers will misappropriate corporate assets and split the proceeds with large shareholders. Contrary to current and past approaches to agency theory, we find that, in this equilibrium, (1) large shareholders do not monitor the management, (2) small shareholders do not free ride and (3) the residual ownership is held by the managers and the large shareholders.