The Law Commission

The Law Commission

(LAW COM No 246)

Shareholders Remedies


Law Commission Report 246
published 24 October 1997

CONTENTS

	EXECUTIVE SUMMARY				Summary
PART I: INTRODUCTION
	Terms of reference				1.1
	Problems identified in the consultation paper				1.4
	Guiding principles				1.9
	Provisional recommendations				1.13
	Response to consultation and summary of main recommendations				1.18
	Scottish Law Commission				1.24
	Northern Ireland				1.27
	The Woolf Report				1.28
	Structure of the report				1.31
	Acknowledgments				1.33
PART II: CASE MANAGEMENT OF SHAREHOLDER PROCEEDINGS
	Introduction				2.1
	Preliminary issues				2.7
	Security for costs				2.11
	Power to dismiss claim or part of claim or defence which has no realistic prospect of success				2.13
	Adjournment to facilitate ADR				2.19
	Determination of how facts are to be proved				2.24
	Exclusion of issues from determination				2.25
	Costs sanctions				2.28
	Implementation of recommendations for case management				2.33
	Pre-action protocols				2.36
	Conclusion				2.38
PART III: A NEW ADDITIONAL UNFAIR PREJUDICE REMEDY FOR SMALLER COMPANIES
	Introduction				3.1
	The scheme proposed in the consultation paper				3.2
	Our provisional view				3.11
	Update of statistical survey				3.13
	Respondents' views				3.14
	Our final view				3.19
	An alternative approach				3.26
	General approach to conditions for presumptions				3.32
	Details of proposed conditions				3.38
	The first presumption				3.54
	The second presumption				3.57
	Buy out notice				3.63
	A possible remedy for "no-fault" situations				3.65
	Conclusion				3.69
PART IV: OTHER REFORMS RELATING TO PROCEEDINGS UNDER SECTIONS 459-461
	Amendments to wording of section 459				4.3
	Clarification of its scope by other means				4.14
	Imposition of limitation period on claims under the section				4.16
	Adding winding up to the remedies available under section 461				4.24
	The power to determine relief as between respondents				4.50
	Advertisement of section 459 petitions				4.54
	Permitting former members to bring proceedings under section 459				4.57
	Conclusion				4.61
PART V: ARTICLES OF ASSOCIATION
	Introduction				5.1
	Shareholders' exit article for smaller private companies				5.4
	Arbitration				5.34
	Variation procedure				5.39
	Conclusion				5.49
PART VI: A NEW DERIVATIVE ACTION
	Introduction				6.1
	International developments				6.8
	The need for a new derivative action				6.10
	Should it be implemented by primary legislation or in rules of court				6.16
	The position under Scots law				6.22
	Availability of the new derivative action				6.23
	Extent to which common law rule should be abrogated				6.51
	Procedural steps				6.58
	Issues relevant to grant of leave				6.70
	Other relevant provisions				6.94
	Conclusion				6.111
PART VII: OTHER REFORMS
	Reform of section 14				7.2
	Pre-action discovery				7.13
	Conclusion				7.17
PART VIII: SUMMARY OF RECOMMENDATIONS					8.1
APPENDIX A: DRAFT COMPANIES (MEMBERS' PROCEEDINGS) BILL					Text not available
APPENDIX B: DRAFT RULE ON DERIVATIVE CLAIMS					Appendix B
APPENDIX C: DRAFT REGULATION 119: EXIT RIGHT					Appendix C
APPENDIX D: THE SHAREHOLDERS' ACTION IN SCOTLAND - VIEWS AND RECOMMENDATIONS OF THE SCOTTISH LAW COMMISSION					Appendix D
APPENDIX E: RELEVANT EXTRACTS FROM THE COMPANIES ACT 1985 (INCLUDING PROPOSED AMENDMENTS)					Appendix E
APPENDIX F: RELAVANT EXTRACTS FROM THE INSOLVENCY ACT 1986 (INCLUDING PROPOSED AMENDMENTS)					Appendix F
APPENDIX G: 1990 PRACTICE DIRECTION (CH D) (COMPANIES COURT: CONTRIBUTORY'S PETITION)					Appendix G
APPENDIX H: COMPANIES (UNFAIR PREJUDICE APPLICATIONS) PROCEEDINGS RULES 1986					Appendix H
APPENDIX I: RELEVANT EXTRACTS FROM THE DRAFT CIVIL PROCEEDINGS RULES					Appendix I
APPENDIX J: STATISTICS RELATING TO THE FILING OF SECTION 459 PETITIONS					Text not available
APPENDIX K: LIST OF PERSONS AND ORGANISATIONS WHO COMMENTED ON CONSULTATION PAPER NO 142					Appendix K