Companies Act 1985

Valid from 16/02/2001

F1 347I Enforcement of directors’ liabilities by shareholder action. E+W+S

(1) Any liability of any person under section 347F or 347G as a director or former director of a company is (in addition to being enforceable by proceedings brought by the company) enforceable by proceedings brought under this section in the name of the company by an authorised group of members of the company.

(2) For the purposes of this section “authorised group”, in relation to the members of a company, means any such combination of members as is specified in section 54(2)(a), (b) or (c).

(3) An authorised group of members of a company may not bring proceedings under this section unless—

(a) the group has given written notice to the company stating—

(i) the cause of action and a summary of the facts on which the proceedings are to be based,

(ii) the names and addresses of the members of the company comprising the group, and

(iii) the grounds on which it is alleged that those members constitute an authorised group; and

(b) not less than 28 days have elapsed between the date of the giving of the notice to the company and the institution of the proceedings.

(4) Where such a notice is given to a company, any director may apply to the court within the period of 28 days beginning with the date of the giving of the notice for an order directing that the proposed proceedings are not to be instituted.

(5) An application under subsection (4) may be made on one or more of the following grounds—

(a) that the unauthorised amount within the meaning of section 347H has been repaid to the company or subsidiary undertaking as mentioned in subsection (1), (2), (4) or (6) of that section (as the case may be) and the other conditions mentioned in that subsection were satisfied with respect to that repayment;

(b) that proceedings to enforce the liability have been instituted by the company and are being pursued with due diligence by the company;

(c) that the members proposing to institute proceedings under this section do not constitute an authorised group.

(6) Where such an application is made on the ground mentioned in subsection (5)(b), the court may make such order as it thinks fit; and such an order may, as an alternative to directing that the proposed proceedings under this section are not to be instituted, direct—

(a) that those proceedings may be instituted on such terms and conditions as the court thinks fit;

(b) that the proceedings instituted by the company are to be discontinued;

(c) that the proceedings instituted by the company may be continued on such terms and conditions as the court thinks fit.

(7) If proceedings are brought under this section by an authorised group of members of a company, the group shall owe the same duties to the company in relation to the bringing of those proceedings on behalf of the company as would be owed by the directors of the company if the proceedings were being brought by the company itself; but no proceedings to enforce any duty owed by virtue of this subsection shall be brought by the company except with the leave of the court.

(8) Proceedings brought under this section may not be discontinued or settled by the group except with the leave of the court; and the court may grant leave under this subsection on such terms as it thinks fit.

Textual Amendments

F1 Pt. XA (ss. 347A-347K) inserted (16.2.2001) by 2000 c. 41, s. 139, Sch. 19 (with s. 156(6), Sch. 3 para. 12); S.I. 2001/222, art. 2, Sch. 1 Pt. I (subject to transitional provisions in Sch. 1 Pt. II)