Preface to third edition
Preface to second edition
Preface to first edition
Table of statutes
Table of statutory instruments
Table of EC and international materials
Table of cases
Chapter 1 Companies’ Separate Legal Personality
The perpetual problem
Meaning of ‘company’ and ‘shareholder’
Company
Shareholder
Separate legal personality
Its origin
Its foundation: Salomon v Salomon
The exception: piercing the corporate veil
The implications of a separate legal personality
Shareholders not liable for the company’s debts
A company makes agreements in its own name
Profits generated by a company are its own
Shareholders have no rights to the assets of a company
A company has the right to sue and be sued in its own name
Wrongs committed by a company are not chargeable to its members
Shareholders do not owe their company a duty of care
Shareholders are not per se entitled to represent the company
Chapter 2 Directors and their Duties
Introduction
The nature of the office of director
Who owes directors’ duties and to whom are they owed?
Shadow directors
Source of directors’ duties – the common law and Part 10 of the 2006 Act
Scope and nature of statutory duties
Duty to act within powers
Duty to promote the success of the company
Duty to report own wrongdoing
Duty to exercise independent judgment
Duty to exercise reasonable care, skill and diligence
Duty to avoid conflicts of interest
Duty not to accept benefits from third parties
Bribery Act 2010
Duty to declare interest in proposed transaction or arrangement
Civil consequences of breach of general duties
Ratification of breach of duty by shareholders
Can directors owe duties direct to shareholders?
At common law
Fiduciary duties
No reflective loss
Relief from liability – section 1157
Chapter 3 Shareholders’ Relationships
Purpose of the chapter
No fiduciary duty towards one another
Agreement the source
Dispensation before the 2006 Act
The 2006 Act
Significant changes
The constituent parts of the constitution under the 2006 Act
Interpretation
General principles
Implication
Pre-emption
As between shareholders
The 2006 Act
Chapter 4 The Liability of Directors and Advisers of the Company Directly to Shareholders
Introduction
All companies limited by shares
At common law
Breach of fiduciary duty
Misrepresentation Act 1967
Regulated companies
Financial Services and Markets Act 2000
The City Code on Takeovers and Mergers (‘the Code’)
Chapter 5 Who is in Control? The Rule in Foss v Harbottle
Introduction
The rule in Foss v Harbottle
The respective powers and roles of directors and members in relation to litigation
Majority rule among members
No application to breach of shareholder’s personal rights
The exceptions to majority control – a derivative claim
Chapter 6 Derivative Claims
Introduction
The common law
Ultra vires acts
Breach of fiduciary duty or negligence by a director combined with personal benefit to the director
Personal benefit or equitable fraud is necessary
Wrongdoer control
Where the complainant has personally benefited from the breach of duty
Discretion
‘Double’ or ‘multiple’ derivative claims
Derivative claims under the 2006 Act
Scope and application
The statutory procedure – two hurdles
The first hurdle
The second hurdle
The court’s powers when deciding whether to give permission to continue a derivative claim
Company’s indemnity as to costs and the rule in Wallersteiner v Moir
Derivative claims and insolvent companies
Derivative claims and foreign companies
Chapter 7 Personal Claims
Introduction
Personal rights conferred by statute
Rights relating to company registers
Register of members
Where directors refuse to register a transfer of shares in reliance on power contained in the articles
Procedure and costs
Rights relating to company meetings
Members’ power to require a general meeting to be held
The power of the court to order a meeting
Class rights
Rights relating to takeover offers
‘Squeeze-out’
‘Sell-out’
Shareholders opposing squeeze-out notices
Rights relating to the removal of directors
Non-statutory rights and limitations on rights: shareholders’ agreements
Third parties
Chapter 8 Reflective Loss
Essence of the ‘no reflective loss’ rule
Prudential
Marex
Gore Wood and its treatment in Marex
The fate of Giles v Rhind, Gardner v Parker and Perry v Day
Marex – conclusions
Developments after Marex
Onus of proof
Practical application
Claim vesting in company only
Claims vesting in both company and shareholder
Claims vesting in shareholder to the exclusion of the company
Chapter 9 Unfair Prejudice: Section 994
Section 994 of the 2006 Act (‘section 994’)
Its predecessors
Ambit and scope of section 994
Objective test for construction
Forums for section 994 dispute resolution
Components for a successful claim
Standing
‘Member’ as defined by section 112 of the 2006 Act (‘section 112’)
Standing under section 994(2)
Other avenues to standing
No standing
Management of the affairs of a company
‘Management’
‘Company’
The ‘affairs’ of a company
Members’ ‘interests’
Equitable rights
Interests affected other than as member
Legitimate expectation not confined to quasi-partnerships
‘Unfairly prejudicial conduct’
Interpretation and scope
Fairness
Prejudice
Categorisation of unfairly prejudicial conduct
Breach of the strict legal rules
Equitable considerations overriding the strict legal rules
Powers exceeded or exercised for an illegitimate or ulterior purpose
An event putting an end to the association
Deadlock inapplicable to section 994
Procedure
Chapter 10 Setting Right Unfair Prejudice: Section 996 remedies
Introduction
Wide discretion
Prayers and orders for relief
Prayers
Orders
The remedies provided by section 996
Section 996(2)(e): buy-out
Section 996(2)(a): future conduct
Section 996(2)(b): injunctive relief
Section 996(2)(c): derivative action authorised
Section 996(2)(d): alteration of articles
Implementation of court’s order
Chapter 11 Just and Equitable Winding Up as Remedy
Relationship with sections 994 and 996 of the Companies Act 2006
Nature and scope of the ‘just and equitable’ basis for winding up
Standing
General
Contributories
Tangible interest
Resolving disputes about standing
Availability of alternative remedies: section 125(2)
Application of section 122(1)(g) illustrated
Deadlock
Breakdown of personal relationships: loss of confidence
Exclusion from management
Disappearance of substratum
Poor management
Circumstances preventing relief under section 122(1)(g)
Other bases for contributories’ petitions
Chapter 12 Inter-relationship of Remedies
Inter-relationship between personal remedies
Section 996 and internal remedies
Section 996 and derivative claims
Section 996 and winding up
Section 996 and damages claims
Chapter 13 Procedure
Introduction
Claims brought by petition
Unfair prejudice
Just and equitable winding up
Claims brought by issuing a claim form
Personal claims
Derivative claims
Chapter 14 Availability of Interim Relief and Summary Judgment on Unfair Prejudice Petitions
Injunctions
Serious issue to be tried
Damages an adequate remedy
Balance of convenience
Receivers
Summary judgment
Striking out
Security for costs
Chapter 15 Taxation Issues
Background issues
Shares and securities are capital assets
Rights can be capital assets
Capital sums derived from assets
Exempt assets and exempt capital gains
Capital gains issues for individuals
CGT reliefs for individuals
Chargeable gains issues for companies
Capital losses
Market value issues
Distributions and dividends
Tax issues on a winding up or liquidation
Employment-related securities regime
Purchase by unquoted trading company of its own shares falling within capital gains tax regime
Taxation of damages
VAT and damages
Evidencing a settlement
Chapter 16 Shareholder Claims in Australia
Companies, their history and constituent players
Directors and their basic functions and duties
Appointment, removal and powers of directors
Directors’ duties and the concept of ‘officers’
Shareholders and the relationship between them
Shareholder rights
Shareholder personal actions
Separate and distinct losses not reflective loss
Fraud on the minority and limits to constitutional amendments
Fiduciary duties owed by directors to shareholders
Contractual claims
Statutory derivative action
Standing and leave
Court powers
Oppression
Grounds for granting relief
Forms of relief
Parties who may apply for relief
Compulsory liquidation remedies
Section 461(1)(e) – directors acting in their own interests
Section 461(1)(f) and (g) – oppressive, unfairly prejudicial or unfairly discriminatory conduct
Section 461(1)(k) – just and equitable
Other statutory claims
Misleading and deceptive conduct
Statutory right to injunctions and damages
Other orders
The minority shareholder in a listed company
Continuous disclosure
ASX Listing Rules requiring approval by general meeting
Remedies
Shareholder class actions
Class action requirements
Institutional shareholders
Class actions and derivative suits compared
Chapter 17 Canada – Comparisons
Introduction: the nature of Canadian corporations
Shareholder remedy one: compliance and restraining orders
Shareholder remedy two: the statutory representative action
Shareholder remedy three: the oppression remedy
Shareholder remedy four: a class veto
Shareholder remedy five: an appraisal remedy
Unanimous shareholder agreements
Chapter 18 An Overview of South African Law
Company law origin
Key concepts
Governance
Constitutional documents
Shareholders’ governance powers
Directors
Director’s duties
Shareholders’ right: declaration of delinquency
Protection against unfairly prejudicial conduct – section 163
Section 163(1)
Section 163(2) – relief
Derivative actions – section 165
A codified action
Demand
Setting aside the demand
Investigation
Refusal of complying with the demand
Court’s residual powers
Winding up
Index