216B. Evidence of shareholders’ approval not decisive — Court approval to discontinue action under section 216A Flashcards

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216B. Evidence of shareholders’ approval not decisive — Court approval to discontinue action under section 216A

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General overview
[216B.01] A breach of directors’ fiduciary duty that caused loss or damage to the company may be “forgiven” or ratified by the company’s members at general meeting: Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378 . Hence, the courts may not be inclined to grant leave for the prosecution of a derivative action against the directors for breach of fiduciary duty on the grounds that the general meeting will likely or has approved the breach of duty. See Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1981] Ch 257; [1982] Ch 204 . Section 216B(1) provides that such ratification by the members by itself shall not be a ground not to grant leave under s 216A.

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