shareholder remedies Flashcards
what are the three remedies?
statutory derivative claim
unfair prejudice claim
winding up
what is a derivative claim?
shareholders sue directors for breaching duties on behalf of the company
an exception to the rule in Foss v Harbottle
when can a derivative claim arise?
in a case of negligence, default, breach of duty or trust
what are the requirements for a derivative claim?
must be initiated by a member against a director or another person
includes a shadow or former director
permission of the court is needed
how can permission of the court be gained?- deriviative claim
there must be a prima facie case
the court must then refuse permission if:
A director acting in accordance with s172 would not seek to continue the claim
The act or omission has been authorised by the company; or
The act or omission has been ratified by the members
for a deriviative claim what are the factors the court has to take into account before giving permission? - under s262(3)
members good faith
Importance a director would attach to the claim
Whether acts are likely to be ratified or auth0orsied
Whether company has decided not to pursue the claim
Whether member could sue in own right
Mission Capital Plc v Sinclaire (2010)
Franbar Holdings Ltd v Patel (2009)
The views of independent members – s263(4)
when can a member make a claim of unfair prejudice
a) the company’s affairs are conducted in a manner which is unfairly prejudicial to the interests of members generally or some part of the members, or
b) an actual or proposed act or omission of the company would be prejudicial
what does the conduct of the company’s affairs refer to?
conduct affecting the affairs of the company - not the conduct of an individual shareholding acting in his private capacity
what are the interests of the members?
interests include legal rights contained in the company’s constitution, articles of association, resolutions of the company and any shareholder agreements
includes a members expectations
what are some examples of unfair prejudice?
exclusion from management
non-payment of dividends
excessive remuneration for directors
misappropriation of assets
when will a company be wound up - insolvency act
if the court is of the opinion that it is just and equitable that the company should be wound up
who must be the petitioner for a winding up petition?
a contributory = a fully or partly paid up shareholder who has an interest in any surplus assets of the company
what are some examples where a winding up order will be granted?
The company is set up for a fraudulent purpose – Re Walter Jacob Ltd [1989]
The company is deadlocked – Re Yenidje Tobacco Co [1916]
There is a lack of probity on the part of the directors – Loch v John Blackwood Ltd [1924]
Exclusion from management in a quasi-partnership company – Ebrahimi [1972]
when will the court not grant a windingh up order?
if it is of the opinion that :
- some other remedy is available to petitioners; and
- they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy
