Derivative Claims under the Companies Act 2006: In Need of Reform?

Qamarul Jailani

Abstract


This article examines the derivative claim regime under Part 11 of the UK Companies Act 2006 with a view to identifying key problematic areas and thereafter providing suggestions for reform. This will be done through three broad areas of focus. Firstly, this article focuses on the current provisions in Part 11 and identifies two problematic requirements: the need for a prima facie case to be established and the requirement for the court to consider an applicant’s good faith. This article argues that both of these requirements are unnecessary and should accordingly be removed. Next, this article will focus on key omissions from Part 11. In doing so, it will be shown that the failure to expressly provide for both multiple derivative claims and a requirement for court permission to discontinue or settle a claim is regrettable. As such, both issues should be expressly provided for in the statutory framework. Lastly, this article will show that the issue of costs currently plays a significant role in deterring potential derivative claimants. Accordingly, this article will propose the introduction of a mandatory indemnity order and the conferral of discretion on the courts to financially reward successful derivative claimants.

 

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