Protection of Derivative Action Claims Under the Companies Act, 2015

Abstract

Derivative action claims are crucial in promoting the protection of the minority shareholders rights, and it is equally a necessary tool in promoting good corporate governance in a company. The Companies Act of 2015 provides for provisions which govern the institution and the principles applicable in derivative action claims. This study assesses the effectiveness of the provisions in the protection of minority shareholders while at the same time ensuring that the best interest of the company is upheld. This study traces the origin of the concept of derivative action claims from the case of Foss vs Harbottle and subsequently the common law principles. The development of the principles of derivative action claims are assessed with a view of evaluating whether the codification of the said principles into the Companies Act have been effective in promoting the objective of derivative Action claims. This study advances the argument that the provisions on derivative action claims under the Companies Act of 2015 are not as effective in the protection of the best interest of the company and the minority shareholders and in analyzing the provisions of the Companies Act of 2015 the study will provide practical solutions.