Foss v Harbottle

Facts

Two shareholders sued the directors, alleging they had sold their own land to the company at an inflated price.

Issue

Could minority shareholders sue for a wrong done to the company?

Held

No. The proper claimant was the company, and the wrong could be confirmed by a majority, so the court would not hear the minority.

Principle

Only the company can sue for a wrong done to it, and the court will not interfere with what the majority can ratify.

Why it matters

Section 255 puts the rule into the Act, and sections 256 to 267 give minority remedies.

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