Case Laws for Commercial Laws

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Foss v Harbottle (1843) 67 ER 189 is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the rule in Foss v Harbottle", and the several important exceptions that have been developed are often described as "exceptions to the rule in Foss v Harbottle". Amongst these is the 'derivative action', which allows a minority shareholder to bring a claim on behalf of the company. This applies in situations of 'wrongdoer control' and is, in reality, the only true exception to the rule. The rule in Foss v Harbottle is best seen as the starting point for minority shareholder remedies


The court dismissed the claim and held that when a company is wronged by its directors it is only the company that has standing to sue. In effect the court established two rules. Firstly, the "proper plaintiff rule" is that a wrong done to the company may be vindicated by the company alone. Secondly, the "majority rule principle" states that if the alleged wrong can be confirmed or ratified by a of members in a general meeting, then the court will not interfere,

Edwards v Halliwell [1950] 2 All ER 1064 is a UK labour law and UK company law case about the internal organisation of a trade union, or a company, and litigation by members to make an executive follow the organisation's internal rules

Some members of the National Union of Vehicle Builders sued the executive committee for increasing fees. Rule 19 of the union constitution required a ballot and a two third approval level by members. Instead a delegate meeting had purported to allow the increase without a ballot.

Jenkins LJ granted the members' application. He held that under the rule in Foss v Harbottle the union itself is prima facie the proper plaintiff and if a simple majority can make an action binding, then no case can be brought. But there are exceptions to the rule. First, if the action is ultra vires a member may sue. Second, if the wrongdoers are in control of the union's right to sue there is a "fraud on the minority", and an individual member may take up a case. Third, as pointed out by Romer J in Cotter v National Union of Seamen[1] a company should not be able to bypass a special procedure or majority in its own articles. This was relevant here. And fourth, as here, if there is an invasion of a personal right. Here it was a personal right that the members paid a set amount in fees and retain

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay up outstanding debts.membership as they stood before the purported alterations.

Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. He ran his business for 30 years and "he might fairly have counted upon retiring with at least £10,000 in his pocket." His sons wanted to become business partners, so he turned the business into a limited company. His wife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took 20,001 of the company's 20,007 shares. The price fixed by the contract for the sale of the business to the company was £39,000. According to the court, this was "extravagent" and not "anything that can be called a business like or reasonable estimate of value." Transfer of the business took place on June 1, 1892. The purchase money the company paid to Mr Salomon for the business was £20,000. The company also gave Mr Salomon £10,000 in debentures (i.e., Salomon gave the company a £10,000 loan, secured by a charge over the assets of the company). The balance paid went to extinguish the business's debts (£1,000 of which was cash...
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