See the attachement and decide which question you are familiar with - Essay Example

As stated by Lord Sainsbury, Parliamentary Under-Secretary of State at DTI, the purpose of the Act is to “to constantly update company law in response to changes in the way companies do business”1. According to Lord Sainsbury, the Act has four key objectives: It cannot be gainsaid that minority shareholders occupy a vulnerable and precarious position in the hierarchy of the corporate structure. The dilemma that of how one is to go about preserving their rights and granting them protections is akin to the dilemma that faces a democratic polity: while the will of the majority is a foremost consideration and indeed is the most equitable way to resolve disputes and frame policies, there is an equally compelling and equally valid need to have regard for the interests of those in the minority – marginalized sectors who face constant threat of being disenfranchised in a system founded on justice and fairness.

The part of the Act that is most relevant to shareholder engagement is Part 11, which provides shareholders with, as stated in paragraph 480 of the Explanatory Notes, “a new procedure for bringing such an action which set down criteria for the court distilled from the Foss v Harbottle jurisprudence". 2 The Act essentially expands the existing derivative action, and allows shareholders to sue the directors for a wider range of breaches, namely in respect of an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust.

Another significant change is that a shareholder who has brought proceedings must apply to court for permission to continue the claim. The following criteria must be followed by the court in considering whether or not refuse permission are as follows: The Act also contains restrictive provisions on the issue of ratification by the majority. Members who are personally interested in the