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Companies Act 2006

Part 11: Derivative Claims and Proceedings by Members

483.Section 170 provides that directors’ general duties are owed to the company rather than to individual members (or third parties such as employees or pressure groups). It follows that, as now, only the company can enforce them. There are three main ways in which the company can take legal action against a director (or, more usually, a former director) for breach of duty:

  • if the board of directors decides to commence proceedings;

  • if the liquidator or administrator following the commencement of a formal insolvency procedure such as liquidation or administration decides to commence proceedings;

  • through a derivative claim or action brought by one or more members to enforce a right which is vested not in himself but in the company.

This part of the Act is concerned with the third of these types of action.

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