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You are here: BAILII >> Databases >> The Law Commission >> SHAREHOLDERS REMEDIES [1997] EWLC 246(APPENDIX B) (24 October 1997) URL: http://www.bailii.org/ew/other/EWLC/1997/246(APPENDIX_B).html Cite as: [1997] EWLC 246(APPENDIX B) |
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DRAFT RULE ON DERIVATIVE
CLAIMS
Derivative claims - general Rule 50.1
Nature of derivative claim Rule 50.2
Adjournment of hearing Rule 50.3
Commencement of claim Rule 50.4
Case management conference Rule 50.5
Leave to continue derivative claim Rule 50.6
Leave to continue - relevant matters Rule 50.7
Leave to continue - courts powers Rule 50.8
Claim by company Rule 50.9
Application under rule 50.9 - relevant matters Rule 50.10
Application under rule 50.9 - courts powers Rule 50.11
Interim remedies Rule 50.12
Costs Rule 50.13
Discontinuance or compromise - courts leave Rule 50.14
50.1 (1) This Part applies to derivative claims.
(2) A derivative claim is a claim by a member of a company where the cause of action is vested in the company and relief is sought on its behalf.
50.2 (1)A derivative claim must state that it is brought by a claimant on behalf of all the companys members other than any who are defendants.
(2)A decision of the court is binding on all the members on whose behalf the claim is brought.
(3)But a decision of the court may not be enforced against a person who is not a party to the proceedings unless the person wishing to enforce it obtains permission from the court.
50.3 The court may at any time adjourn a hearing relating to a derivative claim to enable a general meeting of the company to be convened and held for the purpose of considering a resolution affecting the claim.
50.4 (1) Before a derivative claim is commenced
(a)the claimant must serve on the company a notice which complies with paragraph (2), and
(b)a period of at least 28 days must elapse, beginning with the day on which it is served.
(2) The notice must
(a)set out the cause of action and a summary of the facts on which it is based, and
(b)state that, if the company does not take proceedings in respect of the cause of action, the claimant proposes to commence a derivative claim.
(3) On an application by the claimant the court may order (whether because of urgency or otherwise)
(a)that no notice under paragraph (1) is needed before a derivative claim is commenced, or
(b)that the period mentioned in paragraph (1)(b) is to be taken to be such shorter period as the court specifies.
(4) If a derivative claim is commenced contrary to paragraphs (1) to (3) the defendant may apply to the court for an order striking out the claim.
(5) On an application under paragraph (4) the court may
(a)strike out the claim,
(b)stay the proceedings either generally or until a specified date,
(c)waive any defect in a notice under paragraph (1) or in its purported service,
(d)dispense with the need for such a notice, or
(e)make such other order as it thinks fit.
50.5 If a derivative claim is commenced the court must fix a case management conference.
50.6 (1) The claimant must apply to the court for leave to continue the derivative claim.
(2) The application must be made
(a)at the case management conference, or
(b)at such time (falling before or after the conference) as the court may order before the conference.
(3) If the claimant does not comply with paragraphs (1) and (2) a defendant may apply to the court for an order striking out the claim.
(4) On an application under paragraph (3) the court may
(a)strike out the claim, or
(b)make such other order as it thinks fit.
(5) An application for leave to continue a derivative claim must be heard by a judge unless the court otherwise orders.
50.7 (1) In considering an application for leave to continue a derivative claim the court must take all relevant matters into account.
(2) In particular the court must take the following matters into account
(a)whether the plaintiff is acting in good faith in bringing the derivative claim;
(b)whether the derivative claim is in the interests of the company, taking account of the views of the companys directors on commercial matters;
(c)whether the directors activity as a result of which the cause of action is alleged to arise may be approved by the company in general meeting and (if it may be) whether it has been;
(d)whether the company in general meeting has resolved not to pursue the cause of action;
(e)the opinion (if any) of an independent organ that for commercial reasons the derivative claim should or (as the case may be) should not be pursued;
(f)whether a remedy is available as an alternative to the derivative claim.
50.8 (1) After considering an application for leave to continue a derivative claim the court may
(a)grant leave to continue the claim for such period and on such terms as it thinks fit,
(b)refuse leave and dismiss the claim,
(c)strike out the claim, or
(d)adjourn the proceedings relating to the application and give such directions as it thinks fit.
(2) Subject to paragraphs (3) and (4), the court may give such weight as it thinks fit to the matters it takes into account as required by rule 50.7.
(3) The court must refuse leave and dismiss the derivative claim if it is satisfied that the claim is not in the interests of the company.
(4) The court must strike out the derivative claim if it is satisfied that the directors activity as a result of which the cause of action is alleged to arise has been ratified by the company.
50.9 (1) This rule applies if
(a)a derivative claim is capable of being brought in respect of a cause of action, and
(b)the company commences a claim in respect of the cause of action.
(2) A member of the company may apply to the court for leave to continue the claim as a derivative claim on the ground that
(a)the manner in which the company commenced or continued the claim amounts to an abuse of the process of the court,
(b)the company has failed to prosecute the claim diligently, and
(c)it is appropriate for the member to continue the claim as a derivative claim.
50.10 (1)In considering an application under rule 50.9 the court must take all relevant matters into account.
(2) In particular the court must take the following matters into account
(a)whether the member is acting in good faith in seeking to continue the claim as a derivative claim;
(b)whether the claim is in the interests of the company, taking account of the views of the companys directors on commercial matters;
(c)whether the directors activity as a result of which the cause of action is alleged to arise may be approved by the company in general meeting and (if it may be) whether it has been;
(d)whether the company in general meeting has resolved not to pursue the cause of action;
(e)the opinion (if any) of an independent organ that for commercial reasons the claim should or (as the case may be) should not be pursued;
(f)whether a remedy is available as an alternative to the claim.
50.11 (1) After considering an application under rule 50.9 the court may
(a)grant leave to the member to continue the claim as a derivative claim for such period and on such terms as it thinks fit,
(b)dismiss the application, or
(c)strike out the application.
(2) Subject to paragraphs (3) and (4), the court may give such weight as it thinks fit to the matters it takes into account as required by rule 50.10.
(3) The court must dismiss the application if it is satisfied that the claim is not in the interests of the company.
(4)The court must strike out the application if it is satisfied that the directors activity as a result of which the cause of action is alleged to arise has been ratified by the company.
50.12 The claimant may apply for an interim remedy pending the determination of an application for leave to continue a derivative claim.
50.13 (1) The claimant may apply for an indemnity out of the companys assets in respect of costs incurred or to be incurred in a derivative claim.
(2) The court may grant such indemnity on such terms as it thinks fit.
(3) So far as reasonably practicable, an application under this rule must be made so as to be heard at the same time as the application for leave to continue the derivative claim.
50.14 A claimant may not discontinue or compromise a derivative claim without the leave of the court.
