One of the central concepts in company law is that a company is a juristic person with a separate legal personality. Several consequences flow from the doctrine of separate legal personality, among ...other things, that a company owns its property and assets and may sue or be sued in its name. Therefore, shareholders do not have a direct right of action for a company’s loss. The company itself should institute such a claim save for certain exceptional circumstances like derivative actions. Both the High Court (court a quo) and the Supreme Court of Appeal in Hlumisa Investment Holdings (RF) Ltd v Kirkinis (the Hlumisa case) confirmed that shareholders cannot claim diminution of share value that is linked to the misconduct of company directors and auditors. This article concurs with the court a quo and the Supreme Court of Appeal’s interpretations that as a general rule, directors owe fiduciary duty only to the company and that shareholders cannot rely on a claim for reflective loss in company law. This article assesses the proper plaintiff and reflective loss rules against the backdrop of the Hlumisa case.
Scottish limited partnerships (SLPs) have been the focus of much negative attention. Recent developments appear to have slowed the speed of incorporation of new SLPs. However, this article argues ...that current reforms may not help tackle existing fraudulent SLPs. This does not matter: viewing SLPs as general partnerships with some additional features, arguably fraudulent SLPs have ceased to exist, and offshored SLPs may have lost their separate legal personality. That this has been so far missed can be traced to current organisational theory. This article identifies the implications of reconceptualising the SLP for wider organisational theory and identifies options for state gift thinkers to reformulate their wider claims. Either the claim that separate legal personality derives from the state needs to be diluted to near tautology, or it needs to be limited in geographical extent.
This article advances a new approach to questions of knowledge attribution concerning determination of legal liability. It does so within the setting of a corporate group, specifically where a ...director, manager or secretary of a parent company is appointed to a subsidiary's board and acquires pertinent knowledge in the latter capacity. Under the common law of England and Wales, that knowledge cannot be attributed to the parent unless an exception exists. These are narrow and difficult to establish. However, common officers are often deployed to facilitate information flow between two companies. This creates a troubling paradox which has not previously been identified in the literature. Whilst the parent may benefit from useful intelligence gathered by these individuals, it is largely immune from legal liability if information relating to malfeasance or neglect in the subsidiary is discovered. The proposed approach redresses this imbalance, enabling information concerning the parent's 'affairs' to be attributed to it.
This article seeks to elucidate the historical basis in UK company law of the right for one company to be a member (i.e. shareholder) of another company and, through this position, benefit from ...limited liability. The contemporary relevance of this study lies in better understanding the original rationale behind conferring limited liability upon corporate members. Their own members may have already benefited from it. The protection afforded by this doctrine can, of course, be used strategically by a parent company to minimise losses arising from its subsidiary's activities. It is argued that the courts found corporate membership to be compatible with the Companies Act 1862 in the late 1860s to ensure that the companies in question bore legal responsibility for shares which they held or were held on their behalf. This prevented them from disclaiming liabilities associated with the shares by contending that their very ownership was, in fact, unlawful. Importantly, the courts neither acknowledged nor considered whether corporate members could or, indeed, should benefit from limited liability. Whilst companies' legislation, when read alongside this formative jurisprudence, would later be taken to confer limited liability upon corporate members, this was an unintended consequence of the early case-law and the 1862 Act itself.
Advanced systems of domestic corporate law generally apply a “no reflective loss” principle to shareholder claims. Shareholder claims are permitted for direct injury to shareholder rights (such as ...voting rights). But shareholders generally cannot bring claims for reflective loss incurred as a result of injury to "their" company (such as loss in value of shares). Only the directly-injured company can claim.
In contrast, shareholder claims for reflective loss have consistently been permitted under typical bilateral investment treaties (BITs) in recent years. This paper analyses investment treaty provisions relating to shareholder claims. It addresses (i) treaty regimes for shareholder recovery and company recovery of damages, including their consequences for investor protection and government liability; (ii) the interaction of reflective loss claims with treaty provisions that seek to limit multiple claims; and (iii) treaty provisions applicable to government objections to shareholder claims for reflective loss.
Corporate law in advanced domestic legal systems on the one hand, and typical treaties for the protection of foreign investment on the other hand, treat claims for damages by company shareholders ...differently. Advanced domestic systems generally bar shareholders from claiming for reflective loss – loss that arises from injury to "their" company (such as a decline in the value of shares). The claim for the loss belongs to the injured company and not to its shareholders. In contrast, shareholder claims for reflective loss have been widely permitted under typical investment treaties over the last 10 years. Ongoing OECD-hosted inter-governmental dialogue on investment law is considering whether there are policy reasons justifying the different approaches to shareholder claims for reflective loss.
This paper examines shareholder claims for reflective loss under investment treaties in light of comparative analysis of advanced systems of corporate law. The paper considers the impact of allowing shareholder claims for reflective loss on key characteristics of the business corporation. The paper also explores possible responses by different categories of investors to the availability of shareholder claims for reflective loss under investment treaties.
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