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28-07-2018

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The overall objective of the law in this area [Statutory Derivative Claim, s260-264] is to strike a balance between the need to uphold the majority rule principle and the need to protect minority shareholders from abuse by the majority. Expressed differently, the intention of the Law Commission was to achieve a balance between facilitating the bringing of derivative actions, where the rule in Foss v Harbottle and its exceptions were seen to create undue difficulty, and the protection of companies from too early an interference in their internal management… Considering the statutory provisions in every case is a delicate balancing act. The court must tread carefully. If it adopts a very liberal attitude, this could have the undesirable effect of encouraging frivolous claims against directors, as feared by critics. On the other hand, if it adopts a very strict approach claimants would find themselves back in the common law position where claims were severely restricted, and the very purpose of the provisions would be defeated.”

 

Mujih, E. The new statutory derivative claim: a paradox of minority shareholder protection: Part 2 (2012) Company Lawyer, volume 33, issue 4, pages 99-107 at page 107.

 

Undertake a critical evaluation of whether the process of commencing a statutory derivative claim under the Companies Act 2006 successfully achieves the balance as identified in the above quotation or whether this balance had already been achieved under the exceptions to the rule in Foss v Harbottle. ?

Word Limit: 2000 words excluding footnotes and bibliography.

Product code: Law-QA246

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This assessment is written to focus on the importance and relevance of the duty of directors to strike a balance between protecting the interests of majority stakeholders and minority stakeholders

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