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TWO ASPECTS OF THE STATUTORY DERIVATIVE CLAIM

Lloyd's Maritime and Commercial Law Quarterly

TWO ASPECTS OF THE STATUTORY DERIVATIVE CLAIM

Daniel Lightman *

This article addresses two aspects of the statutory derivative claim introduced by the Companies Act 2006. The first is whether derivative claims which existed at common law but fall outside the definition of “derivative claim” in s 260(1) of the Act—notably, multiple derivative claims and derivative claims in respect of overseas companies—were abolished by the Act. It is argued that, contrary to the prevailing view, the common law derivative claim survives where it falls outside the s 260(1) definition. Secondly, the article summarises how British courts have to date controlled the conduct of derivative claims, and suggests that they should do more to control the settlement of such claims, by imposing a condition preventing their being settled or discontinued without the court’s permission.
In this paper I address two aspects of the statutory derivative claim. First, I challenge the conventional wisdom that derivative claims which fall outside the definition of “derivative claim” in s 260(1) of the Companies Act 2006 (“CA 2006” )—notably multiple derivative claims and derivative claims in respect of overseas companies—can no longer be brought. I suggest that, although this is what the Law Commission had recommended, in fact CA 2006 has not had the effect of abolishing common law derivative claims where such claims fall outside the s 260(1) definition. Secondly, I briefly summarise how English courts (and one Scottish court) have to date controlled the conduct of derivative claims, and suggest that they should do more to control the settlement of such claims, by imposing a condition that they may not be settled or discontinued without the permission of the court.

Claims which fall outside the Companies Act 2006, Part 11, Chapter 1

It was the Law Commission’s firm recommendation that the statutory derivative claim procedure should replace the common law derivative action entirely.1 The Law Commission noted2 that it had been said3 of the equivalent Canadian legislation (the Canadian Business Corporations Act 1985) that:
“It would only lead to confusion to allow both common law and statutory actions. A more orderly development of the law would result from one point of access to a derivative action and would allow a body of experience and precedent to build up to guide shareholders”.
TWO ASPECTS OF THE STATUTORY DERIVATIVE CLAIM

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