Bill Davies casts a critical eye over the new statutory derivative provisions
Two cases have recently tested the new statutory derivative provisions in the Companies Act 2006. In both Mission Capital plc v Sinclair [2008] All ER (D) 225 and Franbar Holdings Ltd v Patel [2008] EWHC 1534 (Ch), permission to continue the derivative claim was refused.
Bringing a derivative claim was never easy and a large number of barriers were created by the courts in a bewildering array of cases. As a result, the Law Commission dubbed the claim “complicated and unwieldy” and a new statutory procedure was introduced in the Companies Act 2006 (CA 2006). However, although many of the archaic rules have been swept away, the new provisions may still prove to be a formidable obstacle to any shareholder seeking to bring a claim.
Before the main action can be brought, a member must first file sufficient evidence at court to establish a prima facie case. He must then apply to court for permission to continue the claim. This is designed to enable the court to weed out unmeritorious claims at an early stage.
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