Complainants' Remedies

AuthorSuzanne Ffolkes Goldson
ProfessionAttorney-at-Law and Senior Lecturer in the Faculty of Law at The University of the West Indies, Mona
4. Complainants’ Remedies
For far too long, protection for minority shareholders was limited at common
law, and practically non-existent for other stakeholders, in the wake of corporate
misdeeds that aected their interests. e case law is replete with instances where
the infringement of minority shareholders’ rights, or where the duties owed to the
company by directors and ocers were breached, went unpunished, due to limitations
on the ability for actions to be brought.
e main oender was the Rule in Foss v Harbottle,1 which limited the ability of
a minority shareholder to bring an action on behalf of the company for wrongs done
to the company.
e Rule is two-fold and states:
1. the company is the proper plainti where a wrong is done against the
company; and
2. the courts will not ordinarily interfere in the internal matters of a company
where the company is competent to settle it itself, or in the case of an
irregularity, to ratify.
e purpose of the rule was to prevent shareholders from bringing actions which
are frivolous or vexatious against directors or ocers or other persons in control of the
company and to ensure that the actions are brought on behalf of the company and not
its shareholders.
e only recourse was where a shareholder could t into an exception to bring a
derivative action. Jenkins LJ in Edwards v Halliwell 2 stated that:
e cases falling within the general ambit of the rule are subject to certain
exceptions… in cases where the act complained of is wholly ultra vires the
company or association the rule has no application because there is no question of
the transaction being conrmed by any majority… [W]here what has been done
amounts to what is generally called in these cases a fraud on the minority and the
wrongdoers are themselves in control of the company, the rule is relaxed in favour
of the aggrieved minority who are allowed to bring what is known as a Minority
Shareholders’ action on behalf of themselves and all others… [T]he rule did not
prevent an individual member from suing if the matter in respect of which he was
suing was one which could validly be done or sanctioned, not by a simple majority
of the members of the company or association, but only by some special majority,
as, for instance, in the case of a limited company under the Companies Act, a
special resolution duly passed as such.
1. (1943) 67 ER 189.
2. [1950] 2 All ER 1064, 1065–67.

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