Foss v Harbottle [1957] CLJ 194

This case has become so well known that the most important principle arising from it is known as "the rule in Foss v Harbottle".

In brief, if a company is in a position to bring a claim in the civil Courts, the company itself is the proper Claimant for that action. 

The particular case involved an alleged wrong by directors of the company and the two Claimants were minority shareholders in the company.   This principle was later expanded to cover possible claims by shareholders who had suffered loss when their shares had decreased in value, the so-called "reflective loss".  The correct way to bring a claim was by the company, not the shareholders. If the company succeeded in the claim, the shares should increase in value to reflect the successful claim.

The case also stresses the "majority rule principle", stating that a supposed wrong can be confirmed or ratified by a simple majority of the members in a general meeting.

The major exception to this is the derivative action, now referred to in sections 260 to 263 of the Companies Act 2006, and is thus a statutory regime.  In addition, there is the action for unfair prejudice set out in sections 994 to 996 of the Companies Act 2006.