Existing Law Scotland Chapter 1: Derivative Claims in England and Wales Or Northern Ireland
491.The sections in this Part do not formulate a substantive rule to replace the rule in Foss v Harbottle, but instead reflect the recommendation of the Law Commission that there should be a “new derivative procedure with more modern, flexible and accessible criteria for determining whether a shareholder can pursue an action” (Shareholder Remedies, paragraph 6.15). In line with the recommendations of the Law Commission, the derivative claim will be available for breach of the duty to exercise reasonable care, skill and diligence, even if the director has not benefited personally, and it will not be necessary for the applicant to show that the wrongdoing directors control the majority of the company’s shares.
492.The sections in Chapter 1 of this Part introduce a two-stage procedure for permission to continue a derivative claim. At the first stage the applicant will be required to make a prima facie case for permission to continue a derivative claim and the court will be required to consider the issue on the basis of the evidence filed by the applicant only, without requiring evidence from the defendant. The courts must dismiss the application if the applicant cannot establish a prima facie case. At the second stage – but before the substantive action begins – the court may require evidence to be provided by the company. The sections set out a list of the matters which the court must take into account in considering whether to give permission and the circumstances in which the court is bound to refuse permission.
493.The sections will be supplemented by amended Civil Procedure Rules.