by e-mail. The company would then reply to the e-mail
either to confirm that the information remains correct
and current or to give details of changes. The annual
return filing fee would be paid electronically and the
returned e-shuttle would be authenticated by the com-
pany quoting a unique PIN number previously agreed
with Companies House. An ‘image’ of the returned
e-shuttle would be made and be accessible on-line from
Companies House.
Protection of minority interests
There are two major areas of minority protection as
follows:
■Part 11, Chapter 1 (ss 260 –269) of the CA 2006 (the
derivative claim); and
■Part 30 (ss 994 –999) of the CA 2006, to protect mem-
bers against unfair prejudice.
Part 11, Chapter 1: the derivative claim
against directors
This is a new statutory area of claim designed to allow a
minority of members to bring a claim on behalf of the
company for compensation from directors who, being
in breach of duty, have caused it loss.
What is a derivative claim?
It occurs when A claims, say, damages which have been
suffered by B (not A). Any damages awarded will go to
B, though A can recover the costs of a successful claim
from the defendant. Attempts to use such a form of
claim were made by shareholders who wished to sue on
behalf of their company for damages caused by the acts
of its directors, those directors being also in voting con-
trol of the company. This type of claim was blocked by
the rule in Fossv Harbottle(1843), which ruled that
such claims were invalid. Then came a long history of
case law providing exceptions to Fossand letting, now
and again, a derivative claim through.
This text has in previous editions included many of
these cases but since there is now a special claim against
directors there seems little point in continuing with
them. They are not in general helpful in an interpreta-
tion of the new provisions.
Nevertheless, the rule in Fossand the exceptions to it
remain in the common law.
The new procedure
The CA 2006 introduces a new procedure under which
a shareholder may bring proceedings on behalf of the
company against a director for damage caused to it by
negligence, default, breach of duty or breach of trust. If
the claim is successful the compensation will go to the
company; but the derivative claimant, the shareholder,
will recover costs in a successful claim.
There are safeguards for directors:■A claimant must obtain court permission to proceed
with the claim. This is a two-stage process: a pre-
liminary stage aimed at removing vexatious claims,
followed by a full hearing to see whether permission
should be granted.
■The court must refuse permission where the claim is
in the view of the court not in accordance with the
duty to promote the success of the company, or if it is
satisfied that the act or omission has been authorised
or ratified by the company, or where it is likely to be
ratified by the company.Despite the safeguards, more derivative claims are likely
to be brought against wrongdoing directors.Other statutory protection of
the minorityIn addition to the protection available to the minority by
reason of the exceptions to Foss, various minority rights
are given by statute.
The most far-reaching is the right of a minority share-
holder to petition the court for relief where the share-
holder believes that his interests are being ‘unfairly
prejudiced’ by the way in which the company’s affairs
are being carried on. This section will be looked at
separately.
Other main examples of statutory protection are:■the right given to 15 per cent to object to the courts in
regard to a proposed variation of class rights;
■the right of a member of a solvent company to peti-
tion the court for a compulsory winding-up on the
just and equitable ground;
■the right given to one-tenth of the members to re-
quire the convening of a general meeting;
■the right given to a member or members with a one-
twentieth interest to get an item up for discussion at
the AGM.Part 2Business organisations