Course Description

Synopsis:

We will look at Shareholder Remedies over 2 separate parts. Part 1 focuses on situations where the legal wrong is done to the company (so the shareholder is only indirectly affected). Part 2 will concentrate on direct wrongs or harm suffered by a shareholder (the latter are often referred to as “personal wrongs”). This division may seem at first sight to be overly technical, since in both cases the shareholder is detrimentally affected and may wish to seek a remedy. Further, it is not always straightforward to identify on which side of the line some wrongs fall. However, the distinction flows from the fundamental principle of separate legal personality and thus it is necessary to consider the rules in this bifurcated way.

But what happens when the legal wrong to the company is committed by one or more directors? The obvious example of such a wrong is a director’s breach of duty.  This is a potentially awkward situation, as there is a real risk that the board of directors would not bring an action (ie, lawsuit) to enforce the company’s rights.  In the first part, we examine the rules surrounding this rather perplexing topic.  You will note that there are two regimes which govern this situation: one at common law, and the other under s 216A. In practice, however, the statutory regime under s 216A is of much greater significance as it is a broader and more plaintiff-friendly, and it is those rules that we will concentrate on (see 4 below). However, we first need some understanding of the common law rules so as to appreciate the context in which s 216A applies. 

In Part 1, we considered above what are essentially corporate wrongs, i.e. wrongs that have been done to the company and in respect of which the company is thus the proper plaintiff.  The idea of ratification by those in control of wrongs committed against the company by its directors was also introduced. Although there are some wrongs that cannot be ratified, there may be many others that can be. A minority shareholder who is the indirect victim of such improper conduct by the majority would have the possibility (1) to bring a derivative action (most likely, a statutory derivative action) or (2) to seek a winding up on the just and equitable ground. But these remedies may not be suitable for all situations. The former focuses on a wrong done to the company by the directors, and the latter option may be too drastic in the circumstances. 

• Introduction
  • Corporate wrongs vs. shareholder wrongs
  • Corporate wrongs: the enforcement problem
• The Company’s Decision Whether to Sue
  • Duty of Good Faith to Act in the Company's Interests
  • Duty to Act for Proper Purposes
• Common Law – The Rule in Foss v Harbottle
• Statutory Derivative Action

Intended For:

• Audit Professionals / PAIP 
• Finance Professionals  / PAIB 
• Public Sector Finance
• C-suite & Directors
• Business Owners

Competency Mapping: 

• CPE Category 1 = 1.0 CPE Hours