Are double derivative actions preserved?

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By Adam Dowdney

In UPMS v Fort Gilkicker, the High Court had to decide whether common law recognises the concept of double derivative actions and, if so, whether they survived the coming into force of the Companies Act 2006.

The single derivative action is a longstanding principle of English company law. It was established by common law as an exception to the harsh rule in Foss v Harbottle that only the company itself had locus standi to bring an action in the company’s name. That meant that no action could be taken against directors where those directors controlled the company or could veto action on the company’s part against themselves.

Common law also evolved the derivative action principle to confer a right of action upon persons with the closest sufficient interest, allowing them to bring a claim on the company’s behalf — the so-called ‘double derivative’ action…

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