This report recommends law reform designed to make shareholder remedies more affordable and more appropriate in modern conditions. The unfair prejudice remedy and the derivative action are specialist remedies, and the former is far more common than the latter. The derivative action is not common but it is an important mechanism of shareholder control of corporate wrongs. The current law is archaic. Our principal recommendation is for a new rule of court which would set out in a modern and accessible form the circumstances in which the courts will permit the derivative action to be brought.
Prevention is better than cure.
Litigation is time-consuming and costly. In order to minimise reliance on shareholder remedies, we recommend that a new article is added to Table A, which is the statutory model form of a company's articles of association. This contains a basic dispute resolution mechanism, and will encourage shareholders in future to have pre-agreed routes to resolve disputes without litigation. It is for the Government, Parliament and the new Civil Procedure Rule Committee to decide whether to implement our recommendations. Implementation of the new rule of court for the derivative action and the new regulation in Table A does not depend on Parliamentary time.