chapter  7
18 Pages

The articles of association

The rule in Foss v Harbottle has acted like a dead hand on minority protection in British company law. The judge held that the rights accorded to members were the rights accorded to registered members and therefore their votes were wrongly rejected. The exception of fraud enabled a shareholder to bring an action on behalf of the company for a fraud perpetrated by somebody in control. The safeguard is that a member of a company who brings a derivative claim must apply to the court for permission to continue with the claim. The old minority remedy had various drawbacks. These were highlighted by the Jenkins Committee in 1962. Most importantly, the new remedy applies in cases of unfair prejudice. The erstwhile husband excluded the former wife from participating in the management of the company. The case involved allegations of exclusion from management and corporate mismanagement leading to a loss of value in the petitioner's shareholding.