This chapter discusses the rule in Foss v Harbottle and the development of the common law derivative claim as an exception to that rule. The chapter considers the nature of a derivative claim including multiple derivative claims and the basis for granting permission for a claim at common law. The chapter then considers the statutory derivative claim introduced by the Companies Act 2006 (CA 2006), Part 11 and examines the basis for granting permission for these statutory claims. The chapter also addresses the issue of reflective loss and the circumstances in which reflective loss will bar a claim by a shareholder. Personal actions at common law and specific statutory rights for shareholders under the CA 2006, for example, rights to information or to call meetings, are also considered.
Chapter
20. The derivative claim and the rule in Foss v Harbottle
Chapter
20. The derivative claim and the rule in Foss v Harbottle
This chapter discusses further aspects of shareholder remedies, namely the common law multiple derivative claim; derivative claims under Companies Act 2006 (CA 2006), Part 11; the reflective loss principle; personal actions at common law; and specific statutory rights under the CA 2006. At common law, a shareholder aggrieved by a breach of duty by a director could bring a derivative claim on behalf of the company, as an exception to the rule in Foss v Harbottle. That common law claim now remains as a common law multiple derivative claim whereas the ‘ordinary’ derivative claim now is a statutory claim under CA 2006, Part 11. This chapter explores both types of derivative claim and assesses their value to shareholders. An important constraint on shareholder recovery is the principle governing reflective loss which has recently been restated by the Supreme Court. This chapter considers the current position in the light of that development.
