Business Law Organisations Essay Example | Topics and Well Written Essays - 2000 words

Business Law Organisations - Essay ExampleSince unfairly prejudicial is not defined by the Act, this means that there are blanket(a) reasons why a minority shareholder may let a cause of action against a corporation, which effectively negates the constraints established by Foss. This paper allow for examine Foss, will examine derivative actions, and will examine the Companies Act (2006), concluding that, while Section 260 of the Act does not provide shareholders with any more(prenominal) protection than what was had under Foss, section 994 does provide this protection. Foss v. Harbottle Even though shareholders are effective in holding directors accountable, the UK courts have a common law rule, represented in Foss v. Harbottle (1840) 67 ER 189. In this case, devil minority shareholders accused the defendants, who were the directors of a follow called Victoria Park Company, of misapplying land, wasting land and obtaining improper mortgages, without the permit of the sharehol ders. The court in the Foss case dismissed the shareholders case, stating that only the company itself has a right to sue the directors. The reasoning for this might be best stated by the court in a subsequent case, Edwards v. Halliwell 1950 2 All ER 1064. The judge in this case states that the sound reason why minority shareholders cannot bring an action against directors is that, if there is only a minority bringing the case, it would mean that the majority of the company is in favor of what was done. Ramsay & Saunders (2006) state that there are two prongs to the Foss case one, it established the proper plaintiff who is the company itself two, it established the principle that directors should be independent and not subject to shareholder meddling into business personalized business (Ramsay & Saunders, 2006). There are exceptions to the Foss rule. One is that the company did an illegal or ultra vires act. A shareholder can bring an action on this basis, because the majority ca nnot subscribe an illegal or ultra vires act (Wedderburn, 1957 Cockburn v. Newbridge Sanitary Steam Laundry Co. 1915 1 IR 237). Another exception is that, if the company takes an action which, in the companys constitution, requires a special majority to take this action, then a minority shareholder may sue if the company takes this action in difference of opinion to its own constitution (Black, 1983 Edwards v Halliwell 1950 2 All ER 1064). Berkahn (1998) states that another exception is that a shareholders personal rights have somehow been infringed by the corporation, therefore that shareholder has a right to sue for his personal rights infringement (Berkahn, 1998 Pender v Lushington (1877) 6 Ch D 70). Another exception is the fraud on the minority exception, which means that the wrong-doers actions amounts to fraud (Lo, 2004 Atwool v Merryweather (1867) LR 5 EQ 464n). Buckley (1976) states that this last action is the only derivative action of the exceptions, as the first three e xceptions involve personal actions. Therefore, according to Maloney (1986), this action is the only true exception to Foss (Maloney, 1986). Statutory Actions Although Foss limited the actions that minority shareholders can take, statutory actions have restored many of the rights of the minority. One is that the Companies Act (2006) has prone shareholder permission to bring