Question 1

What is the rule in Foss v Harbottle (1843) 2 Hare 461 about?

Accepted Answer

The rule in Foss v Harbottle establishes that when a wrong is done to the company, the proper claimant to bring a lawsuit is the company itself, not individual shareholders or other parties.

Question 2

What is meant by unfair prejudice?

Accepted Answer

Unfair prejudice refers to the situation in which the affairs of the company are managed in a way that unfairly harms the interests of a shareholder. This can include situations such as dilution of share value or exclusion from decisions that should have involved the shareholder.

Question 3

In cases of reflective loss, who is the appropriate claimant?

Accepted Answer

The appropriate claimant in cases of reflective loss is the company itself. Reflective loss refers to the economic loss suffered by shareholders as a result of a wrong done to the company, and it is the company that has the right to sue for such wrongs.

Question 4

What is meant by reflective loss?

Accepted Answer

Reflective loss refers to the situation where loss suffered by shareholders due to a breach of duty by the directors of the company is also reflected in the value of the company itself. Therefore, loss to the company also damages the shareholders as a result.

Question 5

Where a shareholder has suffered loss due to actions violating her personal rights, the appropriate cause of action is

Accepted Answer

A personal suit is the correct cause of action when a shareholder has suffered loss due to actions violating her personal rights. This is because personal suits allow the shareholder to address violations against their individual rights directly, rather than addressing wrongs done to the company as a whole, which would be the focus of a derivative action.

Question 6

Who bears the costs of a derivative action?

Accepted Answer

The costs of a derivative action are typically borne by the company rather than the shareholder who brings it. This is because the action is being taken on behalf of the company, and any recovery obtained typically goes to the company, not the individual shareholder.

Question 7

Which of the following is not a matter to be taken into consideration by the court when considering whether to allow a derivative action?

Accepted Answer

The view of the Crown Prosecution Service is not a relevant matter to be taken into consideration when considering whether to allow a derivative action. The other three options listed are relevant factors to be considered by the court.

Question 8

The court must refuse permission to continue a derivative action if

Accepted Answer

The answer of The court must refuse permission to continue...

Question 9

Who would be the appropriate party to bring a derivative action?

Accepted Answer

A derivative action is brought by a shareholder on behalf of the company to remedy a wrong committed against the company. Typically, a minority shareholder brings a derivative action, as they may not have enough voting power to effect change within the company.

Question 10

Derivative actions cannot be brought against

Accepted Answer

Derivative actions are lawsuits brought by shareholders on behalf of the corporation against third parties or insiders (directors or connected persons) for actions that have harmed the corporation. However, derivative actions cannot be brought against directors or connected persons themselves, nor can they be brought against third parties based on causes of action independent from the directors. Therefore, the best choice is D.

Question 11

Where wrong doing directors (in a case involving the sale of land) are also shareholders, which of the following are they not allowed to do?

Accepted Answer

The answer of Where wrong doing directors (in a case...

Question 12

Where the directors have wronged the company, the decision on whether to litigate transfers to

Accepted Answer

Shareholders are the owners of the company and have the ultimate authority to make decisions on behalf of the company. If the directors have wronged the company, it is the shareholders who have the right to decide whether to take legal action against the directors. The other options listed (stakeholders, non-executive directors, and the secretary of state) may have an interest in the situation, but they do not have the authority to make decisions regarding litigation on behalf of the company.

Question 13

What is a derivative action?

Accepted Answer

A derivative action is a legal action brought by a shareholder on behalf of a company against a third party or against the company's directors or officers for breach of duty. The shareholder brings the action because the company itself cannot or will not take action, either because it has been prevented from doing so or because the wrongs complained of are committed by those in control of the company.

Question 14

Who can petition against unfair prejudice?

Accepted Answer

Only a shareholder of the company has the right to petition against unfair prejudice under the Companies Act 2006. Directors and creditors do not have this specific right, and the secretary of state does not have a direct stake in the company's affairs.

Quiz 14: Robbery, Burglary and Other Offences in the Theft Acts