ExpertMedium2 marksMultiple Choice
ACCA · Question 21 · Corporate and Business Law
A minority shareholder in a logistics company discovers that the majority shareholder (who is also the sole director) has been fraudulently transferring company assets to a personal offshore account. The company itself will not sue the director because the director controls the board. What legal action can the minority shareholder take to recover the assets for the company?
A minority shareholder in a logistics company discovers that the majority shareholder (who is also the sole director) has been fraudulently transferring company assets to a personal offshore account. The company itself will not sue the director because the director controls the board. What legal action can the minority shareholder take to recover the assets for the company?
Answer options:
A.
Bring a claim for unfair prejudice under Section 994.
B.
Bring a derivative claim under Part 11 of the Companies Act 2006.
C.
Apply for the compulsory liquidation of the company.
D.
Sue the director personally for breach of contract.
How to approach this question
Identify the mechanism by which a shareholder can enforce the company's rights against a wrongdoing director.
Full Answer
B.Bring a derivative claim under Part 11 of the Companies Act 2006.✓ Correct
Under Part 11 (s.260) of the Companies Act 2006, a derivative claim allows a shareholder to bring a claim on behalf of the company against a director for negligence, default, breach of duty, or breach of trust. Any damages recovered go to the company, not the individual shareholder. This is an exception to the rule in Foss v Harbottle (that the company is the proper plaintiff).
Common mistakes
Confusing a derivative claim (suing on behalf of the company) with an unfair prejudice petition (suing for personal relief as a shareholder).
Practice the full ACCA LW — Corporate and Business Law Practice Exam 4
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