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Therefore it is inappropriate to advocate that the

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Therefore ‘It is inappropriate to advocate that the enforcement of corporate rights and duties should be undertaken exclusively by ASIC or shareholders. However ASIC is often in a superior position to shareholders to enforce corporate rights.’ C. Statutory Derivative Action Because the wrong is to the company, when shareholders sue in relation to wrong they do so on behalf of the company o Hence it is a derivative action Therefore any money recovered as a result of action goes to the company, not to shareholders bringing the derivative action on its behalf The statutory derivative action is contained in {Part 2F.1A Corporations Act} and it replaces the general law criteria under {s 237 Corporations Act} Note that the original rule under general law in {Foss v Harbottle} was that the company was the proper plaintiff but over time a number of exceptions to that rule were created until it was all overridden by statute C.1 Who can bring a Statutory Derivative Action? The right to bring a derivative action is NOT automatic, therefore leave of the court is first required under {s 237(1) Corporations Act} o This requirement is stipulated in {s 236(1)(b) Corporations Act} Under {s 236(1) Corporations Act} the following persons have standing to apply for leave to bring a derivative action: (1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings if: o (a) the person is: (i) a member, former member, or person entitled to be registered as a member of the company or related body corporation or (ii) an officer or former officer of the company; AND o (b) the person is acting with leave granted under section 237 Note that under general law, the exceptions to the rule in {Foss v Harbottle } applied only to members, the potential applicants under s 236 are much wider C.2 What Proceedings can SDA be brought for? Additionally Part 2F.1A also applies to a wider range of situations than the rule in {Foss v Harbottle} as it allows a person to obtain leave of the court to: o Bring proceedings on behalf of the company o Intervene in any proceedings to which the company is party for the purpose of taking responsibility on behalf of the company for those proceedings Essentially this means that under {s 236(1) Corporations Act} a statutory derivative action may be brought for: o (a) breach of director’s duties or o (b) any proceedings to which the company is party (however this is more rebuttable under Business Judgement Rule) C.3 Grounds for Granting Leave (Requirements for SDA) Under {s 237(2) Corporations Act} the court must grant the application if satisfied that: o (a) it is probable that company will not itself bring the proceedings , or properly take responsibility for them; This will be clearly made our where there is an alleged breach of director’s duties where the directors are still in
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Therefore It is inappropriate to advocate that the...

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