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Case Is Foss V. Harbottle

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Q2
Foss v. Harbottle
In September 1835, Victoria Park Company was set up to establish a residential area to the east of Wilmslow Road, an “estate” of substantial houses in spacious grounds. The prosperous business and professional families could live there. Richard Foss and Edward Starkie were two minority shareholders, and claimed that the property of the company had been misapplied and various mortgages were given improperly over the company’s property. During the general meeting, they said that no action should be taken against them. At last, the Court dismissed and rejected the two shareholders’ claim, and held that a breach of duty by the directors of the company was a wrong done to the company for which it alone could sue. The first reason is because of the ‘proper plaintiff rule’ is that a wrong done to the company may be vindicated by the company alone where the corporation has separate legal entity. The second reason is the ‘majority rule principle’, it states that if the alleged wrong can be confirmed or ratified by a simple majority of members in a general meeting, then the court will not interfere, cadit …show more content…

However, as an ultra vires act is not void vis-à-vis a third party [Section 25(1) CA 1965], the question of recovery of the company’s property from a party to an ultra vires transaction would not arise. For all practical means and purposes, the ultra vires exception to the rule in Foss v Harbottle is effectively defunct. Any one of the member may ask a court to restrain it from doing something that is ultra vires, in the sense of being beyond the company’s restricted object, Simpson v Westminster Palace Hotel Co (1860). Such a claim is permitted as an exception to the proper claimant aspect of the internal management principle. (Minority Shareholders and Derivative Actions,

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