Derivative Claims in Pakistan and Transplanting English Law

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ABSTRACT

Derivative claims are those claims which the stakeholders bring for the company's benefit against the directors of the company or, in some cases, a third party that is involved in the company. However, it is called a derivative claim only when this action is taken in the interest of the company and not personally for the shareholder. The rationale behind this law was to prevent the court from making business decisions on behalf of the corporation and to avoid judicial declaration of dividends. It will then be appropriate that where the directors have, for example, refused to award dividend to a certain shareholder when other shareholders in his class have collected theirs; all that the private shareholder can do is to ask for a declaratory order or an injunction directing the board or the controlling majority to act properly. In this way, the court has maintained its sanctity by refraining from making a dividend award in place of the board while at the same time its order has led to an indirect damages award to the shareholder.

TABLE OF CONTENTS

ABSTRACTII

CHAPTER 1: INTRODUCTION1

Research Background1

Research Aim1

CHAPTER 2: LITERATURE REVIEW2

Law Regarding Derivative Claims2

Transplanting English Law4

CHAPTER 3: METHODOLOGY6

Research Design7

Ethical Concerns7

CHAPTER 4: LIMITATIONS OF THE RESEARCH9

BIBLIOGRAPHY10

CHAPTER 1: INTRODUCTION

Research Background

Derivative claims are those claims which the stakeholders bring for the company's benefit against the directors of the company or, in some cases, a third party that is involved in the company. However, it is called a derivative claim only when this action is taken in the interest of the company and not personally for the shareholder. The companies Act 2006 (part 11), which was enforced in 2007 on October 1, includes the new conditions regarding the derivative action. This may result in increase in the count of derivative claims or actions being taken.

So far, the purpose of these provisional rules regarding the derivative actions was to bring forward limited cases to the court of justice.

However, the removal of the pre-Act requirement for a director to have benefited personally from any act or omission has widened the potential scope for such claims. In addition, the Act has expanded the duties of a director which means there is potentially more opportunity for claims to be made against directors.

Research Aim

The purpose of the study is to analyse whether derivative claims in current situations in Pakistan can be improved by transplanting English law.

CHAPTER 2: LITERATURE REVIEW

The purpose of the study is to analyse whether derivative claims in current situations in Pakistan can be improved by transplanting English law.

Law Regarding Derivative Claims

If the shareholder of a company wants to take a derivative action, the consent of the court is required in the beginning. The shareholder must bring forth a form and the required particulars of the claim before applying for the consent of the court for the derivative action.

At common law, the dividing line between personal and derivative rights has similarly been a subject of concern over the ...