Module 14: Shareholders and Minority Protection Flashcards
If a wrong is done to a company?
Only company itself may bring an action for damages
Directors decide this
Foss v Harbottle 1843
Company itself to bring proceedings
Shareholders can’t sue as company only proper claimant in action
In GM must decide whether to bring proceedings
Two key principles from Foss v Harbottle 1843?
Proper claimant rule
Majority rule
4 Key exceptions to rule in Foss v Harbottle?
Illegal act- any member may apply to void
Special procedure
Membership rights deprived
Fraud on the minority- shown that belonged to company, passed to those, in control of company
Statutory derivative action can be brought in respect of an action?
Arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company
Statutory derivative action is wider than common law how?
CL claim can only be brought if director benefitted
CA 2006 does not require to show wrongdoing control majority of shares
Court will only grant derivative proceedings if?
Application discloses a prima facie case
Will grant permission by considering number of factors if has a prima facie case e.g. good faith, promote success of company, not to pursue, likely to be ratified, can pursue in own right?
Court must dismiss derivative proceedings if?
Director acted in accordance with duty to promote success of company
Omission yet to occur, authorised
Already occurred, authorised or ratified
Kleanthous v Paphitis 2011
P majority shareholder in Ryman, La Senza looking for buyer
Ryman decided not to invest
P bought La Senza, Ryman agreed to lend him money
K wanted to claim against Ryman
K not granted permission to bring derivative claim as directors approved the loan
Wishart v Castlecroft Securities Ltd 2009
Bad faith
Petitioner entitled to start derivative claim
Upheld on Appeal
Claimant granted indemnity in relation to expenses for 1st time in Scotland
Any member may may petition for a remedy for unfair prejudice under CA Section 994 on the grounds?
Affairs conducted in unfairly prejudicial manner
Actual or proposed omission would be so
Appropriate remedy for unfairly prejudicial?
Regulate affairs
Desist with act
Not make alterations to articles without leave of court
Share to be bought out- most common
Two most common applications under s994 are?
Discrimination against a minority- member as a member
Exclusion for Management
Other grounds on which petition may be based?
Failure to call a meeting
Provision of inadequate info on takeover bid
Payment of excessive director’s bonuses and pension contributions
Failure to pay dividend
Only members can present
Tay Bok Choon v Tachansan Sdn Bhd 1987
Exclusion from management
Entitled to have company wound up
