BL - shareholders - derivative claims

Question 1

Derivative claims:
What is a derivative claim?
🥸

Answer 1

A claim that is derived from the company’s right of action, which the company has not exercised.

Question 2

Derivative claims:
What is the legislation for bringing a derivative claim?
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Answer 2

s.260 CA 2006

Question 3

Derivative claims:
In what circumstances can a derivate claim be brought?
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Answer 3

• Where the directors have breached their statutory duties. 💥
• director need not have benefited from the breach 💰❌
• action is on behalf of the company, not the individual shareholder. 🏭

“brought in respect of a cause of action arising from
- ACTUAL💥or PROPOSED💡 ACT or OMISSION🫥 involving
- NEGLIGENCE, DEFAULT, BREACH OF DUTY OR TRUST by a
- DIRECTOR🎩 of the company.”

Includes common law duties and shadow directors 🧛

NOTE: any remedy is granted to the company, not the shareholder.

Question 4

Derivative claims:
Can third parties (other than directors) be defendants to a derivate claim?
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Answer 4

Yes, but the claim has to be in respect of a breach by a director.
😔🎩

Question 5

Derivative claims:
Who can bring a claim and does it matter when the cause of action occurred?

Answer 5

A member can bring the claim but its immaterial whether they were a member when the breach occurred. But a former member cannot bring a claim.

Question 6

Derivative claims:
How many stages are there in bringing a derivative claim?

Answer 6

Two

Question 7

What is the first stage of a derivative claim?

Answer 7

Obtain permission to continue the claim. The onus is on the member to make out a prima facie case.

🧑‍⚖️👉

Question 8

What is the second stage of a derivative claim?

Answer 8

The court will consider the substantive claim.

Question 9

When considering a derivate claim, what must the court have particular regard to?

Answer 9

The views of the members who have no personal interest in the matter