Foss v Harbottle (1843)

Company Law · Remuneration of Directors (Managerial Remuneration)

Facts.

Two minority shareholders sued the directors of a company alleging they had defrauded the company by selling their own land to it at inflated prices.

Issue.

Could individual members sue for a wrong done to the company?

Held.

No. The wrong was to the company, so the company was the proper plaintiff; and as the majority could ratify, the court would not intervene.

Why it matters.

The foundation of majority rule and of the exceptions (including the statutory oppression/mismanagement remedy) that protect the minority.

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