Derivative action

Cinematic Finance Ltd v Ryder and 17 others [2010] (Ch) (Roth J) 21 October

Whilst proceedings for derivative claims are now covered by the Companies Act 2006 Act, the Act had not sought to establish a radical reversal of the long-standing principle that an action should be pursued by the company and not its shareholders. Although s261(4) gave the court power to allow a derivative claim, the discretion to do so would be exercised in accordance with the established principles. Although it could not be said that it would never be appropriate for a derivative claim to be brought by a majority shareholder in control of a company, permission to do so would be given only in very exceptional circumstances, and it was difficult to envisage what such exceptional circumstances might be! The claimant had contended at the outset that it was having difficulty in achieving access to the company books and records but had not disclosed, at it was in fact the company’s majority shareholder and so had complete control over them The application was dismissed with costs on the indemnity basis.