Derivative Claims Flashcards
Overview of derivate claims by shareholders
Who is the correct claimant generally in claims where a wrong has been done against the company?
The company
What is the effect of derivative claims under s 260?
Shareholders can bring claims on behalf of the company where the directors have breached their statutory duty.
Who receives any remedy granted under a derivative claim?
The company - not the shareholder bringing the claim
When can a derivative claim be brought?
Arises from breach of duty, trust, actual or proposed act or omission of negligence or default from director
Director does not need to benefit personally from act for claim to be brought
Who can a derivative claim be brought against?
Directors or another person (in narrow circumstances)
Who may bring a derivative claim?
- member at time or after time of breach
- not a member who was a member at the time of breach but is no longer a member
What is the first stage of court approval in relation to a derivative claim?
Permission must be obtained from the court.
To do so, shareholder must make out a prima facie case.
What factors will the court consider at the first stage of a derivative claim in deciding whether or not to grant permission?
- would a person seeking to promote the success of the company bring the claim
- is the member acting in good faith
- would the act/omission of the director be ratified by the company
What is the second stage of court approval in relation to a derivative claim?
Court will considered detailed criteria in relation to claim.
Particularly evidence from members who are not involved in the claim.
What happens if a derivative claim passes both stages of court approval?
It goes to trial
