lecture 12 Members actions.docx

lecture 12 Members actions.docx - LECTURE 12 Members...

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LECTURE 12 Members actions & rights Members actions & rights Members actions and rights Statutory Derivative Action (allow shareholders/members to sue directors; sec 237 members asking court to allow the company to chase after director- simply asking for permission; in real case, it is company vs. director; remedy goes back to company) For breach of duties owed to the company Action on behalf of and in the name of the company Personal Rights(remedy goes back to shareholder) Oppression Winding-up Injunction Inspection of Books Members actions & rights – statutory derivative action General principles: directors owe duties to the company: Greenhalgh v Arderne Cinemas members as a whole company is proper plaintif for wrongs done to company: Foss v Harbottle Statutory Derivative Action – s 236 an action brought on behalf of the company for wrongs done to the company (i.e. breaches of directors duties) where it is probable that the company will not itself bring proceedings (directors will not pass a resolution that the company brings proceedings against the directors for breaches of directors duties) general law derivative actions are abolished: s 236(3) Person who can sue on company’s behalf s 236(1)(a) : Member Former member Person entitled to be registered as member Officer Former officer Person must obtain leave (permission) of the Court for a statutory derivative action (this is an action, not a right, as the Court’s permission is required) – s 236(1)(b) Action that can be taken by a person listed under s 236(1)(a) who has been granted leave as required by s 236(1)(b) – s 236(1): bring proceedings on behalf of the company, or intervene in existing proceedings on behalf of the company Proceedings must be in the company’s name s 236(2) Person must obtain leave of the Court under s 237 as required by s 236(1)(b) by satisfying all of the following elements – s 237(2): (a) company is unlikely to bring proceedings (b) applicant is acting in good faith-honesty (c) in best interests of company to grant application (d) serious question to be tried (reason to bring it to the court) (e) notice given to company or otherwise appropriate to grant leave 14 days
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LECTURE 12 Members actions & rights Once satisfied, the Court must grant leave to the person to bring or intervene in proceedings on behalf of the company s 237(2) – the Court must grant leave if satisfied that ( Swansson v R A Pratt Properties Pty Ltd ): (a) Company is unlikely to bring proceedings directors in breach are not likely to resolve that the company brings proceedings (against them) (b) Applicant is acting in good faith good cause of action exists no abuse of process (c) In best interests of company to grant leave, consider: nature/character of company efect of action on company’s business redress available by alternative means
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