In order to bring a derivative claim a member would

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In order to bring a derivative claim, a member would need to apply to the court and show a prima facie case. This means that he must show on the face of it that a wrongdoing as described above has taken place. The court may decide either to permit the action, dismiss it, and/or give such directions as necessary – s. 261 CA 2006. In deciding whether or not to give permission, the court would consider: • Whether the act is such as would likely be authorized or ratified by the company • Whether the member bringing the action was acting in good faith Whether the company has decided not to bring any action in respect of the wrongdoing • Whether the action should rather be pursued as a personal claim by the member concerned – S. 263(3) CA 2006 • The evidence of members who have no personal interest in the matter – s. 263(4) The court would refuse permission where a perceived wrongdoing was authorized, approved or ratified by the company – s. 280. 23.4.3 CONTINUING AN ACTION AS A DERIVATIVE CLAIM Where a company or any member has brought an action against a director for wrongdoing, another member of the company may apply to the court to take over and continue the case as a derivative claim – s. 262 and 264 CA 2006. The court would give permission for the take-over and continuation of the action if it is appropriate for the claimant to do so and the court is satisfied that the action was brought in abuse of the court process and that the company or those who brought it have failed to pursue the case diligently. See Stainer v Lee [2010] EWHC 1539. This provision is designed to prevent directors or interested shareholders from blocking court action against their wrongdoing. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 419 MEMBERS’ POWERS AND THE PROTECTION OF MINORITIES 23.4.4 THE UNFAIR PREJUDICE REMEDY Sections 994–996 Companies Act 2006 make provisions to protect minority shareholders from the wrongful act or conduct of majority shareholders. A member or shareholder of a company may petition the court for remedy on the ground: • That the affairs of the company have been or are being conducted in a manner unfairly prejudicial to the interest of its members generally or part thereof (including himself), or; That an actual or proposed act or omission of the company is or would be prejudicial – s. 994(1) To succeed on the ground of unfair prejudice, the act complained of must amount to a prejudice and must also be unfair. An unfairly prejudicial act means an inequitable act or act done in bad faith and which is injurious or detrimental to the minority shareholders. This would include a serious breach or abuse of the company’s rules. The unfair prejudice must however be a commercial detriment or disadvantage. Emotional or social disadvantage is not enough. Thus, it will include matters connected with a shareholder’s shares, the business of the company, dividends, company profits and expenditure, voting, general meetings, etc.
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  • Fall '19
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