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Company Law

The rule in Foss v Harbottle and its exceptions

In Chapter 26: Majority and Minority Rights

Company Law

Ronan Keane
Bloomsbury Professional
Fourth edition
Publication Date:
January 2007
Law As Stated At:
1 September 2006
[26.02] The case from which the rule derives its name was decided before the first modern companies legislation was on the statute book and concerned a company incorporated under a private Act. Some of the defendants – effectively the promoters and in some cases directors of the company – had bought land which they knew would be used in the company’s operations and then sold it on to the company at an inflated price. Two of the shareholders brought an action claiming among other reliefs the setting aside of these transactions and the payment of compensation to the company on the ground that they were fraudulent. Wigram V-C dismissed the action, pointing out that the Act left it to the ‘proprietors’, as the shareholders were described, to decide whether to bring proceedings and that, since the actions complained of were neither illegal nor beyond the powers of the company, it ...
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