Derivative Actions under the Companies Act 2006

The Centre was delighted to welcome Jonathan Barne, advocate, on Thursday 26 March, to give a talk on derivative actions in company law. 

Mr. Barne's paper, which was very well received, started by providing a brief history of the derivative action, from its origins as an exception to the 'proper plaintiff' principle in Foss v Harbottle onwards, before moving on to consider the changes introduced by the Companies Act 2006. Most notably, the new procedure now requires pursuers in Scotland to raise an action to seek leave to raise a derivative action, before raising the action itself. This constitutes an additional hurdle for pursuers in Scotland, since the provisions in England and Wales address the question of permission to continue as a preliminary matter in the derivative action itself.

And, in a terminological change, derivative actions are now known as derivate proceedings in Scotland and derivative claims in England and Wales, under sections 265 and 260 of the 2006 Act respectively. 

The practicalities of the new procedure are currently being tested in the first case under the 2006 Act in Scotland, namely Wishart v Black, where the petitioner was represented by Mr Barne.  Lord Glennie's decision from the Outer House was handed down in February 2009, and the appeal is due to be heard by the Inner House in May 2009.

The paper concluded with a brief Q&A session, before the speaker and attendees retired for a welcome glass of wine!