Therefore, the company, not its shareholders, has the right to sue for wrongs done to it; and (ii) absent the rule, a shareholder would always be able to sue for wrongs done to the corporation which indirectly cause harm to the shareholder.
Shareholders are permitted to sue the corporation directly only if their own rights have been harmed.
The common law allows the company to sue directors for such losses and one of the principles of statutory interpretation is that a statute does not alter the existing common law more than necessary. … A loss to a company as a result of a fall in its share price is not an actionable loss to a shareholder.
The majority has the power to ratified any act which is claimed as wrongful but neither the company nor an individual shareholder can sue to redress the wrong. It is majority only who can ratify any wrongful in their meeting by passing a resolution for that.
Shareholders v Directors – who wins?
- to attend and vote at general meetings of the company;
- to receive dividends if declared;
- to circulate a written resolution and any supporting statements;
- to require a general meeting of the shareholders be held; and.
- to receive the statutory accounts of the company.
Approving the company’s final dividend. Appointing or re-appointing the company’s auditors. Electing or re-electing the company’s directors. Approving amendments to the company’s articles of association.
Who pays for a derivative lawsuit?
Most derivative suits are settled and thus do not go to trial and appeal. The lead attorney for the plaintiff usually determines whether a proposed settlement is acceptable. The fee to be paid to the lead attorney is usually negotiated as part of the overall settlement of a derivative suit.
Do those cases have to be brought as derivative actions—that is, on behalf of the company—or can they be brought individually, as one shareholder against another? Normally, a shareholder cannot sue a company or for mismanagement, at least not in the shareholder’s own name.
Can a director of a corporation be sued?
A corporate shareholder can sue a corporation’s officers or board of directors either through a direct lawsuit or indirectly through a derivative lawsuit.
Because shareholders do not act on behalf of the company, they are not fiduciaries and do not owe the corporation the same duties as directors and officers. However, the rules are different for controlling shareholders—those who own a majority of the business.
Directors should ensure the information they provide to shareholders is clear and comprehensible, not misleading and does not hide material particulars. However, in the absence of a special relationship, directors do not owe fiduciary duties to their company’s shareholders.
How do you prove breach of fiduciary duty?
To win a breach of fiduciary duty complaint the plaintiff must prove that the fiduciary (defendant) had duties such as acting good faith, being transparent with pertinent information, and being loyal to the plaintiff.