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You are here: BAILII >> Databases >> The Law Commission >> SHAREHOLDERS REMEDIES [1997] EWLC 246(APPENDIX E) (24 October 1997) URL: http://www.bailii.org/ew/other/EWLC/1997/246(APPENDIX_E).html Cite as: [1997] EWLC 246(APPENDIX E) |
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Relevant extracts from the Companies Act
1985 (including proposed amendments
(1) Subject to the provisions of this Act, the memorandum and articles, when registered, bind the company and its members to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles.
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(1) A derivative action is an action by a member of a company where the cause of action is vested in the company and relief is sought on its behalf.
(2) A derivative action may be brought if and only if the cause of action arises as a result of an actual or proposed act or omission involving
(a) negligence, default, breach of duty or breach of trust by a director of the company, or
(b) a director putting himself in a position where his personal interests conflict with his duties to the company.
(3) The cause of action may be against the director or another person (or both).
(4) Subsections (1) to (3) do not affect the courts power to make an order under section 461(2)(c) or anything done under such an order.
(5) References in this section to a director include references to a shadow director.
(1) In Scotland, to protect the interests of a company and obtain a remedy on its behalf, a member of the company is, with leave of the court and subject to subsections (3) to (5), entitled to raise under this section an action the cause of which arises as a result of an actual or proposed act or omission involving
(a) negligence, default, breach of duty or breach of trust by a director of the company, or
(b) a director putting himself in a position where his personal interests conflict with his duties to the company.
(2) The action may be against the director or another person (or both).
(3) Subject to subsection (5), the member shall serve notice on the company that, unless within the period of 28 days beginning with the day of service the company raises an action as respects the actual or proposed act or omission, he intends to raise such an action under this section; and it shall not be competent for the member to raise it until that period has elapsed.
(4) The notice shall specify the cause of action and shall include a summary of the facts on which the action is based.
(5) The court may on cause shown disapply, or modify the application of, the provisions of subsections (3) and (4) in any case.
(6) Leave of the court shall be refused for the purposes of subsection (1) if any of the relevant criteria is shown to arise.
(7) Subsections (1) to (6) do not affect the court's power to make an order under section 461(2)(c) or anything done under such an order.
(8) In an action raised under this section the court may, on such terms as it thinks fit, grant an application by the member for an indemnity, out of the company's assets, in respect of expenses incurred, or to be incurred, by him in or in relation to the action.
(b) to relevant criteria, are to such criteria as may be prescribed for the purposes of this section after consultation with the Lord President of the Court of Session.
(10) There may also be prescribed, after such consultation, matters to which the court shall have regard in reaching a decision
(b) as to whether to grant leave for the purposes of subsection (1).
(11) A statutory instrument made by virtue of subsection (9)(b) or (10) shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(12) This section is without prejudice to the right of a member of a company to raise an action to protect his own interests and to obtain a remedy on his own behalf.
(1) A member of a company may apply to the court by petition for an order under this Part on the ground that the companys affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
(1A) A petition for an order under this Part may include an application to the court to order the winding up of the company, but only if the court gives leave for it to include such an application.
(2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law, as those provisions apply to a member of the company; and references to a member or members are to be construed accordingly.
(3) In this section (and so far as applicable for the purposes of this section, in section 461(2)) "company" means any company within the meaning of this Act or any company which is not such a company but is a statutory water company within the meaning of the Statutory Water Companies Act 1991.
(a) a member of a private company limited by shares petitions under section 459(1) for an order under this Part,
(b) it is shown that the member has been removed as a director or has been prevented from carrying out all (or substantially all) his functions as a director,
(c) immediately before the removal or prevention mentioned in paragraph (b) the member held at least 10 per cent of the voting rights in the company, and
(d) immediately before the removal or prevention mentioned in paragraph (b) all (or substantially all) the members of the company fulfilled the director condition set out in subsection (3).
(2) Unless the contrary is shown, it must be presumed that because of the removal or prevention mentioned in subsection (1)(b) the companys affairs have been conducted in a manner which is unfairly prejudicial to the interests of the petitioner.
(3) A member fulfils the director condition at the time concerned if he is then a director of the company.
(4) Nothing in this section affects the operation of section 459 apart from this section.
Section 459B(1) The reference in section 459A(1)(c) to the voting rights in the company is to the rights conferred on shareholders in respect of their shares to vote at general meetings of the company on all (or substantially all) matters.
(2) For the purposes of section 459A(1)(c) rights of the member must be taken into account only if they are rights as sole holder of shares.
(3) For the purposes of section 459A(1)(c) rights which are exercisable only in certain circumstances must be taken into account only
(a) when the circumstances have arisen, and for so long as they continue to obtain, or
(b) when the circumstances are within the control of the person who has the rights.
(4) For the purposes of section 459A(1)(c) rights which are normally exercisable but are temporarily incapable of exercise must continue to be taken into account.
(5) The following rules apply for the purposes of section 459A(1)(d) if at the time concerned a share is held by persons jointly
(a) if at least one of the holders is a director of the company, the director whose name appears first in the companys register of members must be taken to be the only member by virtue of the share;
(b) in any other case, the holder whose name appears first in the companys register of members must be taken to be the only member by virtue of the share.
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(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection (1), the courts order may
(a) regulate the conduct of the companys affairs in the future,
(b) require the company to refrain from doing or continuing an act complained of by the petitioner or to do an act which the petitioner has complained it has omitted to do,
(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct,
(d) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the companys capital accordingly,
(2A) However, the court may not provide for the company to be wound up unless the petition includes an application to the court to order its winding up.
(3) If an order under this Part requires the company not to make any, or any specified, alteration in the memorandum or articles, the company does not then have power without leave of the court to make any such alteration in breach of that requirement.
(4) Any alteration in the companys memorandum or articles made by virtue of an order under this Part is of the same effect as if duly made by resolution of the company, and the provisions of this Act apply to the memorandum or articles as so altered accordingly.
(5) An office copy of an order under this Part altering, or giving leave to alter, a companys memorandum or articles shall, within 14 days from the making of the order or such longer period as the court may allow, be delivered by the company to the registrar of companies for registration; and if a company makes default in complying with this subsection, the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.
(6) The power under section 411 of the Insolvency Act to make rules shall, so far as it relates to a winding-up petition, apply for the purposes of a petition under this Part.
(a) by virtue of section 459A the presumption there mentioned applies and the contrary is not shown, and
(b) the court decides to make an order under this Part providing for the purchase of the petitioners shares.
(a) the purchase to be for a price which represents for each share of a particular class a rateable proportion of the market value of all the companys shares of that class;
(b) that market value to be found by assuming a sale by a willing seller to a willing buyer of all the companys issued share capital.
(3) The presumption mentioned in subsection (2) is displaced if the court orders it to be displaced.
(1) The provisions of the Insolvency Act 1986 about winding up on the application of a contributory (except for sections 122, 124 and 125) apply in a case where an application for the winding up of a company is included in a petition under section 459(1) by virtue of section 459(1A).
(2) Subsection (3) has effect if a member of a company petitions under section 459(1) for an order under this Part and the petition is amended so as
(a) to include an application for the winding up of the company by virtue of section 459(1A), or
(b) to include an application for the winding up of the company under section 122(1)(g) of the Insolvency Act 1986 (the just and equitable ground).
(3) In such a case section 129(2) of the Insolvency Act 1986 (winding up deemed to commence at time of presentation of petition) applies as if the reference to the presentation of the petition for winding up were to the making of the amendment of the petition.
