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Alex J.
Alex J., Solicitor
Category: Employment Law
Satisfied Customers: 3759
Experience:  Solicitors 2 years plus PQE
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Buachaill again, please Is a major shareholder entitled to

Customer Question

Buachaill again, please Is a major shareholder entitled to sue an MD for breach of fiduciary duty or does it have to be the company? Thanks, Tony
Submitted: 2 years ago.
Category: Employment Law
Expert:  Alex J. replied 2 years ago.
Hi
My name is ***** ***** I am a company law expert.
A shareholder cannot sue a director in his her own name but they can exercise the right to bring what is known as a derivative action. This is a right under s.260 of the Companies Act 2006 - you can bring an action in the name of the company against the dissenting director.
Is the director only in breach of a fiduciary duty or statutory duty as well?
Kind regards
AJ
Customer: replied 2 years ago.
ThanksTwo follow ons..Not sure what a statutory duty might refer to, please advise.Are you suggesting that any shareholder cannot do anything in their own name but mandate the company to take action, even if the directors of the company would prefer not to?
Expert:  Alex J. replied 2 years ago.
Hi
Thank you.
A director has a list of statutory duties under s.172 - 179 of the Companies Act 2006 eg duty to exercise independent judgment not act in conflict etc. These are easier to prove than fiduciary duties.
Minority shareholders have a personal cause under s994 of the Companies Act 2006 a protection against unfair prejudice - this is not against a director personally though.
If a shareholder owns more than 50% of the voting share capital they won't need to bring an action in their own name as they can always remove the director and then appoint a new director to sue the outgoing one in the company s name.
The derivative action gives shareholders the power to bring an action in the company s name where director is clearly acting without authority and breaching its obligations but the shareholder does not have the power to vote that director out.
A company is a distinct legal entity and accordingly if a director breaches his obligations that will be a cause of action that vest with the company not the shareholder.
Kind regards
AJ