Company Law Essay Final Edition
Name: Lam Kai Yip
Student ID: 13115497D
Seminar group: SEM003
Tutor’s name: MEZZANOTTE Felix
Introduction
Before making any discussion on statutory derivative action (SDA) and common law derivative action (CDA), we need to define what they are. Salim (2013) established the meaning of CDA:
The common law derivative action is based on two principles, the ‘majority rule’ and ‘proper plaintiff rule’, stated in the case of Foss v Harbottle (1843). The ‘majority rule’ means simply that the wishes of the majority will prevail over those of the minority. The “proper plaintiff rule’ provides that if a wrong is committed against a company then the company is the proper claimant in respect of that wrong which also stated in Edwards v Halliwell (1950). This principle is interrelated to the separate legal personality doctrine; that is, a company has a personality separate from that of its members and therefore a member of the company cannot sue to enforce rights that belong to the company. (P.126-127)
Moreover, Salim (2013) also defined the meaning of SDA:
The statutory derivative procedure enables a category of persons, with the leave of the court, to bring a derivative action on behalf of the company to intervene in or defend existing proceedings on behalf of the company. (P.132)
Problems
Since there are CDA and SDA in Hong Kong at the same time, it is important for us to identify the differences between them. Also, as Boyle (2002) said that, “statutory derivative action is intended to reform defects in the common law shareholder’s derivative action.” (P.1) Therefore, it is necessary for us to discuss how the extent on SDA will fill the defects and lead to increased shareholder protection in Hong Kong.
Discussion
By comparing the characteristic between SDA and CDA, we can know the differences between them. First, As Yap (2009) pointed out that if members bring a CDA, they must show a fraud on the minority. There are some characteristics on showing that:
Student ID: 13115497D
Seminar group: SEM003
Tutor’s name: MEZZANOTTE Felix
Introduction
Before making any discussion on statutory derivative action (SDA) and common law derivative action (CDA), we need to define what they are. Salim (2013) established the meaning of CDA:
The common law derivative action is based on two principles, the ‘majority rule’ and ‘proper plaintiff rule’, stated in the case of Foss v Harbottle (1843). The ‘majority rule’ means simply that the wishes of the majority will prevail over those of the minority. The “proper plaintiff rule’ provides that if a wrong is committed against a company then the company is the proper claimant in respect of that wrong which also stated in Edwards v Halliwell (1950). This principle is interrelated to the separate legal personality doctrine; that is, a company has a personality separate from that of its members and therefore a member of the company cannot sue to enforce rights that belong to the company. (P.126-127)
Moreover, Salim (2013) also defined the meaning of SDA:
The statutory derivative procedure enables a category of persons, with the leave of the court, to bring a derivative action on behalf of the company to intervene in or defend existing proceedings on behalf of the company. (P.132)
Problems
Since there are CDA and SDA in Hong Kong at the same time, it is important for us to identify the differences between them. Also, as Boyle (2002) said that, “statutory derivative action is intended to reform defects in the common law shareholder’s derivative action.” (P.1) Therefore, it is necessary for us to discuss how the extent on SDA will fill the defects and lead to increased shareholder protection in Hong Kong.
Discussion
By comparing the characteristic between SDA and CDA, we can know the differences between them. First, As Yap (2009) pointed out that if members bring a CDA, they must show a fraud on the minority. There are some characteristics on showing that:
Bibliography: 1. Salim, M. R. & Kaur, D. G. (2013). THE STATUTORY DERIVATIVE ACTION IN MALAYSIA. Bond Law Review, 24 (2), 125-156. 2. Foss v Harbottle (1843). Retrieved March 17, 2014 from http://login.westlaw.com.hk.ezproxy.lb.polyu.edu.hk/maf/wlhk/app/document?src=doc&linktype=ref&&context=2&crumb-action=replace&docguid=ICA4C3F00634511DC847AB79444DF9A9B 3. Edwards v Halliwell (1950). Retrieved March 17, 2014 from http://login.westlaw.com.hk.ezproxy.lb.polyu.edu.hk/maf/wlhk/app/document?src=doc&linktype=ref&&context=17&crumb-action=replace&docguid=I5C82BDD0E43611DA8FC2A0F0355337E9 4. Boyle, A. J. (2002). Minority shareholder 's remedies. Cambridge: Cambridge University Press. 5. Yap, J. L. (2009). Whither the Common Law Derivative Action?. Common Law World Review, 0 (0), 197-206. 6. Lo, H. C. & Qu, Z. (2013). Law of companies in Hong Kong. Hong Kong: Sweet & Maxwell/Thomson Reuters. 7. Companies Ordinance (2012). Retrieved March 17, 2014 from The Hong Kong Polytechnic University, Blackboard Web site: https://learn.polyu.edu.hk/bbcswebdav/pid-857646-dt-content-rid-4651781_1/courses/AF3507_20132_A/Full_New_Companies_Ordinance_Ch622.pdf 8. Ramsay, I. M. & Saunders, B. B. (2006). LITIGATION BY SHAREHOLDERS AND DIRECTORS: AN EMPIRICAL STUDY OF THE STATUTORY DERIVATIVE ACTION., 1-51. 9. CHAPTER 9 COMMON LAW DERIVATIVE ACTION (2009). Retrieved March 17, 2014 from Hong Kong government, Companies Registry Web site: http://www.cr.gov.hk/en/publications/docs/122009_ch9-e.pdf