1. For critical overviews, see eg Reisberg, A Derivative Actions and Corporate Governance (Oxford: Oxford University Press, 2007);CrossRefGoogle Scholar Boyle, Aj Minority Shareholders' Remedies (Cambridge: Cambridge University Press, 2002) chs 1, 2;CrossRefGoogle Scholar Poole, J and Roberts, P ‘Shareholder remedies – corporate wrongs and the derivative action’ [1999] 99 J Bus L 108.Google Scholar

2. See Law Commission Shareholders' Remedies (Law Commission Report No. 246, Cm 3769, Stationery Office, 1997) para 6.4.

3. Ibid, Pt 6.

4. On the ‘accessibility agenda’ within the Act, see Ahern, D ‘Directors' duties, dry ink and the accessibility agenda’ (2012) 128 Law Q Rev 114.Google Scholar

5. On the reform of the common law action in general, see Reisberg, A ‘Derivative claims under the Companies Act 2006: much ado about nothing?’ In Armour, J and Payne, J (eds) Rationality in Company Law: Essays in Honour of DD Prentice (Oxford: Hart Publishing, 2009).Google Scholar

6. See Pt 11, Companies Act 2006. For good overviews of the new derivative claim, see Keay, A and Loughrey, J ‘Something old, something new, something borrowed: an analysis of the new derivative action under the Companies Act 2006’ [2008] 124 Law Q Rev 469;Google Scholar Keay, A and Loughrey, J ‘Derivative proceedings in a brave new world for company management and shareholders’ [2010] 3 J Bus L 151.Google Scholar

7. See A Reisberg ‘Shadows of the past and back to the future: Pt 11 of the Uk Companies Act 2006 (in)action’ (2009) 6 ECFR.

8. [2008] BCC 885.

9. See Payne, J ‘A re-examination of ratification’ (1999) 58 Camb L J 604, p 605;Google Scholar Cranston, R ‘Limiting directors' liability: ratification, exemption and indemnification’ (1992) J Bus L 197 at 199.Google Scholar

10. See Davies, Pl and Worthington, S Gower and Davies' Principles of Modern Company Law (London: Sweet and Maxwell, 9th edn, 2012) p 620.Google Scholar

11. A shareholder's right to sue derivatively, on the company's behalf, can be no greater than the company's right to sue for itself: Burland v Earle [1902] AC 83 at 93.

12. Both current and future members would be so prevented.

13. Or point to a release given under seal by the company.

14. See Partridge, Rjc ‘Ratification and the release of directors from personal liability’ (1987) 46 Camb L J 122.Google Scholar

15. See eg Cranston, above n 10, at 199–200; Davies and Worthington, above n 11, pp 619–620; Worthington, S ‘Corporate governance: remedying and ratifying directors' breaches’ (2000) 116 LQR 638 at 642–643;Google Scholar Law Commission, above n 3, para 684.

16. Indeed, at common law the mere ratifiability of the misconduct (regardless of whether it had in fact been ratified) was seen as justifying the denial of a derivative suit, for there was no point in permitting an action by an individual shareholder when the majority could, and presumably would, decide whether to sue or to ratify.

17. [1950] 2 All ER 1064. For a more detailed discussion of these four categories of unratifiable wrong, see (the two-part article by) Wedderburn, Kw ‘Shareholders' rights and the rule in Foss v. Harbottle ’ (1957) 15 Camb L J 194 and (1958) 16 Camb L J 93.Google Scholar

18. These were ultra vires and illegal acts, acts requiring the sanction of a special majority, acts infringing the personal rights of shareholders and acts that constitute a fraud on the minority. The suggestion of a fifth ground, namely ‘wherever the justice of the case so requires’, was rejected by the Court of Appeal in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204.

19. Burland v Earle, above n 12.

20. See Hirt, Hc ‘Ratification of breaches of directors' duties: the implications of the reform proposal regarding the availability of derivative actions’ (2004) 24 Co Law 197;Google Scholar Keay and Loughrey, above n 7, at 162–165; Payne, above n 10, at 611–613.

21. See Wedderburn, above n 18.

22. This applied the general principle that members of a company were permitted to vote, as shareholders, on matters in which they were interested; see eg North-West Transportation v Beatty (1887) 12 App. Cas. 589.

23. Unless, perhaps, by a unanimous vote of all shareholders; see eg Hannigan, B ‘Limitations on a shareholder's right to vote – effective ratification revisited’ (2000) J Bus L 493 at 495–499.Google Scholar

24. Wedderburn (Pt 2), above n 18, at 96. It was in this sense that Lord Wedderburn thought the fourth exception to Foss ought to be called ‘fraud on the company’ rather than ‘fraud on the minority’.

25. See eg Baxter, Cr ‘The true spirit of Foss v Harbottle ’ [1987] 38 NI Law Q 6;Google Scholar Davies and Worthington, above n 11, pp 624–626; Wedderburn, above n 18; Sullivan, Gr ‘Restating the scope of the derivative action’ [1985] 44 Camb L J 236 at 239–244;Google Scholar A Reisberg ‘Theoretical reflections on derivative actions in English law: the representative problem’ (2006) 3 ECFR 69 at 77–78; Baxt, R ‘Judges in their own cause: the ratification of directors' breaches of duty’ [1978] 5 Monash U L Rev 16.Google Scholar

26. Baxter, above n 26, at 14.

27. See Burland v Earle, above n 12, at 93.

28. Ibid.

29. [1916] 1 AC 554, pp 563–564. For difficulties in construing Cook v Deeks as involving a taking of corporate property, see Sullivan, above n 26, at 241.

30. [1967] 2 AC 134.

31. Ibid, at 143.

32. In fact, the directors failed to take the precaution of having their conduct ratified, notwithstanding the impending sale of the company to a third party, who subsequently caused the company to sue the (by now former) directors.

33. See Wedderburn, Kw ‘Derivative actions and Foss v Harbottle ’ [1981] 44 Mod L Rev 201, 206.Google Scholar

34. See eg Hannigan, above n 24, at 506.

35. [1956] Ch 565.

36. [1978] Ch 406.

37. In Regal itself, above n 31, Lord Russell of Killowen emphasised that liability applied irrespective of ‘whether the plaintiff [company] has in fact been damaged or benefited by his action’ (at 144) and Lord Wright (at 154) noted the court's inability to determine whether the company was commercially able to exploit for itself the opportunity taken by the director.

38. [1981] 1Ch 257.

39. Ibid, at 316.

40. Ibid, at 316D. As Vinelott J himself conceded (at 316F), a test of ‘personal benefit’ created a penumbra of uncertainty where the benefit was received not by the director personally but, say, by a member of his family.

41. [1981] 1 Ch 257, 307.

42. See above n 21 and the text therewith.

43. Of course, Vinelott J's broadened definition of fraud, requiring only personal benefit by the wrongdoer, would correspondingly reduce the instances of non-fraudulent breaches of duty.

44. [1981] 1 Ch 257, at 316–317.

45. See eg Baxter, above n 26; Sullivan, above n 26.

46. Wedderburn, above n 34, at 210–211. Wedderburn pointed out that the House of Lords said nothing to suggest that the directors would not have been permitted to vote on the ratification, and he doubted that they intended, yet simply forgot to mention, this restriction on the directors' right to vote.

47. Sullivan, above n 26, at 248.

48. [1982] 1 Ch 204. For discussion of the Court of Appeal's decision, see Baxter, above n 26; Wedderburn, above n 34; Sullivan, above n 26, Boyle, Aj ‘The private law enforcement of directors' duties’ in Hopt, KJ and Teubner, G (eds) Corporate Governance and Directors' Liabilities (Berlin: Walter de Gruyter, 1985);Google Scholar Speakman, M ‘Directors' duties and the rule in Foss v Harbottle ’ (1983–1985) 10 Sydney L Rev 156;Google Scholar Sealy, L ‘ Foss v Harbottle – a marathon where nobody wins’ [1981] 40 Camb L J 29.Google Scholar

49. By the time of the Court of Appeal hearing, the company's board had decided to adopt the proceedings, thus rendering unnecessary the derivative proceedings.

50. Above n 30.

51. (1867–1868) L.R. 5 Eq. 464.

52. See, for example, the ambiguity inherent in Jessel MR's explanation of Atwool v Merryweather (in Russell v Wakefield Waterworks Co (1875) LR 20 eq 474 at 482), where he notes, ‘[i]t was said that justice required that the majority of the corporators should not appropriate to themselves the property of the minority, and then use their own votes at the general meeting of the corporation to prevent their being sued by the corporation’.

53. Baxter, above n 26, at 15.

54. In this section, we are considering only the doctrinal support for the orthodox, and heretical, versions of the transaction based approach. Section 1 addresses the policy arguments in their support.

55. Wedderburn, above n 34, at 208, fn omitted.

56. Above n 19, at 222A.

57. (1987) 3 BCC 218.

58. It has been argued that a sufficiently independent board of directors might also constitute such an organ; see Prentice, Dd ‘Shareholder actions: the rule in Foss v Harbottle ’ (1988) 104 LQR 341 at 345–346.Google Scholar

59. The decision in Smith v Croft (No 3) applied Vinelott J's earlier judgment in Taylor v National Union of Mineworkers (Derbyshire Area) [1985] BCLC 237.

60. The case does assume that ratification is binding on the company – although, as we noted (above n 15 and the text therewith), this is not entirely certain.

61. See text with n 56 above.

62. See above n 34.

63. But not, to be sure, of any legislative reform of the law, as occurred by Companies Act 2006 s 239(3)–(4); see section 3 below.

64. See Baxter, above n 26, at 16.

65. Or, to put the point more strictly, the validity of a decision not to sue would depend upon whether wrongdoers had voted.

66. See, for example, the imposition of liability under the no-profit rule.

67. See eg Edwards v Halliwell, above n 18, at 1066.

68. See Hirt, above n 21, at 206.

69. That shareholders' authority to sue depends upon their company's constitution, rather than company law, seems to be confirmed by Breckland Group Holdings v London and Suffolk Properties [1989] BCLC 100; Joffe, V et al Minority Shareholders: Law, Practice, and Procedure (Oxford: Oxford University Press, 3rd edn, 2008) paras 1.05–1.08.Google Scholar

70. See, for example, reg 3 of each of the three current versions of Model Articles (for Private Companies Limited by Shares, for Private Companies Limited by Guarantee, and for Public Companies), found respectively in Schedules 1–3 of The (Companies (Model Articles) Regulations 2008 SI 2008/3229).

71. Ibid, reg 4, gives shareholders this power.

72. Worthington, above n 16.

73. See section 3 below.

74. Ibid.

75. See eg Sealy, above n 49; Baxter, above n 26.

76. This is often taken to be the justification for dicta, such as in North-West Transportation v Beatty, above n 24, permitting shareholders to vote notwithstanding a personal interest in the matter; see eg Parkinson, Je Corporate Power and Responsibility (Oxford: Oxford University Press, 1993) p 255.Google Scholar Of course, a shareholder's right to vote out of self-interest is not entirely unlimited. Most notably, a resolution by members to alter a company's articles is liable to be set aside if not passed ‘bona fide in the best interests of the company as a whole’: see Allen v Gold Reefs of West Africa Limited [1900] 1 Ch 656.

77. Literature discussing and debating the merits of contractarian analysis in company law is too voluminous to cite, but a useful introduction remains Cheffins, BR Company Law: Theory, Structure and Operation (Oxford: Oxford University Press, 1997).Google Scholar Where, as here, such analysis employs the parties' ‘hypothetical bargains’ to prescribe the content of company law (rather than, say, seeking to describe and explain the current content of company law), it draws on a larger literature exploring the design of ‘default rules’ in contract law more generally. On that, see eg Charny, D ‘Hypothetical bargains: the normative structure of contract interpretation’ (1991) 89 Mich L Rev 1815;Google Scholar Riley, CA ‘Designing default rules in contract law: consent, conventionalism and efficiency’ (2000) 20 Oxford J Legal Stud 367.Google Scholar

78. Options would include the creation of constitutional rights, class rights, rights conferred by shareholder agreements and so forth.

79. It would require a much longer work to determine whether this condition is currently met in the UK. But if not, it would seem to require an adjustment of the duties of directors, not a rejection of the argument being advanced here.

80. The Companies Act 2006, s 232 (provisions protecting directors from liability are void) might be argued to rest on the assumption that shareholders would not rationally seek to exclude ex ante the duties imposed on directors.

81. This is, surely, the approach captured by the ‘hypothetical director’ test that courts must apply, under the Companies Act 2006, ss 263(2)(a) and 263(3)(b), in deciding whether to grant permission to continue a derivative claim. For factors that the courts have identified as relevant to this commercial calculation, see eg Franbar Holdings v Patel, above n 9; Iesini v Westrip Holdings Ltd Ltd [2010] BCC 420.

82. Bainbridge, Sm The New Corporate Governance in Theory and Practice (Oxford: Oxford University Press, 2008) ch 3.CrossRefGoogle Scholar

83. Reisberg, above n 2, pp 48–50.

84. This is the so-called ‘hindsight bias’ – that the bad consequences of a decision are taken to mean that the decision itself was a bad one.

85. For an argument to that effect, see Riley, Ca ‘The director's duty of care and skill: the case for an onerous but subjective standard’ (1999) 62 Mod L Rev 697.Google Scholar

86. The enforcement (as opposed to the substantive content) of directors' duties has recently begun to receive increased attention; see eg Armour, J ‘Enforcement strategies in UK corporate governance: a roadmap and empirical assessment’ in Armour, J and Payne, J (eds) Rationality in Company Law (Oxford: Hart Publishing, 2009).Google Scholar

87. Eisenberg, Ma ‘The divergence of standards of conduct and standards of review in corporate law’ (1993) 62 Fordham L Rev 436.Google Scholar

88. See Kershaw, D Company Law in Context (Oxford: Oxford University Press, 2nd edn, 2012) pp 455–475;Google Scholar Bainbridge, Sm ‘The business judgment rule as abstention doctrine’ [2004] 57 Vand L Rev 83.Google Scholar

89. Above n 58.

90. See above, text with n 60.

91. Admittedly, in many companies there would be no real likelihood of the company ‘changing its mind’ so long as the existing shareholders remain in control, although things might well be different if the company were to be sold.

92. Hannigan, above n 24, at 504.

93. As Koh notes, ‘[l]egitimate concerns over the abuse of majority power and the corresponding risk of minority shareholder oppression therefore birthed the doctrine of unratifiable wrongs’; see Koh, P ‘Directors' fiduciary duties: unthreading the joints of shareholder ratification’ [2005] J Corp Legal Stud 363 at 387.Google Scholar

94. See above, text with n 60.

95. See Payne, above n 10, at 619.

96. Note, however, that s 260(3) continues to permit members to bring derivative proceedings in respect of corporate acts or omissions that occurred prior to the date they became members, promising a windfall where the price the members paid for their shares already reflected such past misconduct.

97. Take, for example, the purchaser in Regal (Hastings) Ltd v Gulliver, above n 31. Would any injustice be done to such a purchaser if the directors' wrong had been ratified irrevocably?

98. See now the Companies Act 2006, s 170(1).

99. This is surely true even of the Companies Act 2006, s 172. While this does indeed require directors ‘to have regard to’ the interests of a variety of constituencies, the ‘benefit of the members’ is still the ultimate purpose behind this other-regarding requirement.

100. This common law development is explicitly acknowledged by s 172(3).

101. See Davies and Worthington, above n 11, paras 1682–1690; Keay, A ‘Directors' duties to creditors: contractarian concerns relating to efficiency and over-protection of creditors’ (2003) 66 Mod L Rev 665;Google Scholar Riley, Ca ‘Directors' duties and the interests of creditors’ (1989) 10 Co Law 87;Google Scholar Prentice, Dd ‘Creditor's interests and director's duties’ (1990) 10 Oxford J Legal Stud 265;Google Scholar Finch, V ‘Directors' duties: insolvency and the unsecured creditor’ in Clarke, A (ed) Current Issues in Insolvency Law (London: Stevens, 1991) p 87;Google Scholar Keay, A ‘The duty of creditors to take account of creditors' interests: has it any role to play?’ [2002] J Bus L 379.Google Scholar

102. See eg Extrasure Travel Insurances Ltd v Scattergood [2002] WL 31599760 (duty to act for proper purposes).

103. See eg Brudney, V ‘Revisiting the import of shareholder consent for corporate fiduciary loyalty obligations’ (2000) 25 J Corp L 209;Google Scholar Lowry, J ‘Reconstructing shareholder actions: a response to the Law Commission's Consultation Paper’ (1997) 18 Co Law 247 at 249–250;Google Scholar Parkinson, above n 77, ch 8 (opposing members giving approval for fraudulent wrongs in public companies); Koh, above n 94, at 384–387; Reisberg, A ‘Theoretical reflections on derivative actions in English law: the representative problem’ (2006) 3 ECFR 69 at 78–79.Google Scholar

104. This difficulty arises because voting to approve, or reject, a ratification is a ‘collective action’, where the temptation is to free-ride on the efforts of one's fellow shareholders. See generally Rock, Eb ‘The logic and (uncertain) significance of institutional shareholder activism’ (1991) 79 Geo L J 445.Google Scholar

105. On the nature of bounded rationality for economic agents in general, see Hargreaves Heap, S et al The Theory of Choice: A Critical Guide (Oxford: Blackwell, 1992) ch 1.Google Scholar On the problems of informational asymmetry for shareholders specifically, see Cheffins, Br Company Law: Theory, Structure and Operation (Oxford: Oxford University Press, 1997) ch 3.Google Scholar

106. Parkinson, above n 77, ch 8.

107. See Koh, above n 94, at 386.

108. See eg Goergen, M, Renneboog, L and Zhang, C ‘Do Uk institutional investors monitor their investee firms?’ (2008) 8 J Corp Legal Stud 39;Google Scholar Cheffins, Br Corporate Ownership and Control (Oxford: Oxford University Press, 2008) ch 11.CrossRefGoogle Scholar

109. See Macey, Jr Corporate Governance: Promises Kept, Promises Broken (Princeton, NJ: Princeton University Press, 2008) ch 13.CrossRefGoogle Scholar

110. Examples of such multi-company issues would be the terms of a new corporate governance code, to be imposed on all listed companies, or the acceptable structure of executive remuneration packages.

111. For a fuller argument to this effect, see Beck, Sm ‘The shareholders' derivative action’ [1974] 52 Can Bar Rev 159.Google Scholar

112. For discussions of the operation of such a regime in Hong Kong, see Yap, JL ‘Reforming ratification’ [2011] 40 Common Law World Rev 1.Google Scholar

113. Or, at least, in so far as the duty protected the interests of shareholders.

114. Payne, above n 10, at 618–625.

115. Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656.

116. See eg Greenhalgh v Arderne Cinemas Ltd [1950] 2 All ER 1120; Citco Banking Corporation NV v Pusser's Ltd [2007] 2 BCLC 483 [PC].

117. Admittedly, a more objective review was applied in cases in which articles were altered in order to facilitate the expropriation of a minority shareholder. However, this approach may also have to be reviewed in light of the decision in Citco Banking Corporation NV v Pusser's Ltd, above n 117, discussed in Williams, R ‘Bona fide in the interests of certainty’ [2007] 66 Camb L J 500.Google Scholar See generally Davies, and Worthington, , above n 11, paras 19.11–19.22.Google Scholar

118. Such a formulation was adopted in Shuttleworth v Cox Bros & Co [1927] 2 KB 9.

119. On the risks associated with powers of veto, see Hansmann Ha ‘Corporation and contract’ (2006) 8 Am L & Econ Rev 1; Riley Ca ‘The not-so dynamic quality of corporate law: a Uk perspective on Hansmann's “Corporation and contract” ’ (2010) 21 King's L J 469.

120. Above n 39, at 307.

121. Sealy (above n 49, at 32) also criticises the exclusion of some members' votes for being ‘undemocratic’. But the nature and extent of the democracy that is to operate within a company ought to be the outcome of the same contractarian process of hypothetical bargaining discussed above. A ‘democracy’ objection, then, arguably fares no better than a ‘property rights’ objection.

122. See above, text following n 77.

123. Parkinson, above n 77, p 256.

124. See above n 82.

125. Law Commission Shareholders' Remedies: a Consultation Paper (Law Commission Consultation Paper 142, 1996) para 5.2, fn omitted.

126. The Commission recommended that ratifiability, without actual ratification, should be a matter that the court could merely take into account: Law Commission, above n 3, para 6.84.

127. Ibid, para 6.81.

128. This Review, launched in 1998 by the then newly elected Labour government, led eventually to the enactment of the Companies Act 2006. The various consultation documentations associated with the Review are archived at http://bis.ecgroup.net/Publications/BusinessLaw/CompaniesAct2006.aspx (accessed 29 July 2013).

129. CLRSG Modern Company Law for a Competitive Economy: Developing the Framework (London: DTI, March 2000).

130. Ibid, para 4.135.

131. Ibid, para 4.136.

132. Ibid, para 4.135,

133. CLRSG Modern Company Law for a Competitive Economy: Completing the Structure (London: DTI, November 2000).

134. Ibid, para 5.85.

135. Ibid.

136. Ibid, para 5.86.

137. CLRSG Modern Company Law for a Competitive Economy: Final Report, Vol. I (London: DTI, November 2000) para 7.46.

138. By the Companies Act 2006, s 260(2), derivative proceedings may now only be brought under Pt 11 (or pursuant to an order of the court in ‘unfair prejudice’ proceedings (under the Companies Act 2006, s 994).

139. The proceedings in England, Wales and Northern Ireland bear this name. In Scotland, they are called ‘derivative proceedings’.

140. Namely ‘an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company’.

141. Permission must also be refused where the wrong has been authorised by the members in advance; see s 263(2)(c)(i). In the absence of actual ratification, the likelihood that the wrong would be ratified after it has occurred, or authorised before it occurs, is a factor the court must take into account in deciding whether to give permission for the claim to continue

142. Section 263(2)(c)(ii).

143. Under s 261, a claimant must obtain the court's permission to continue a derivative claim. (In Scotland, the court's leave must be obtained to raise derivative proceedings: Companies Act 2006, s 266.) On the permission requirement, and the factors that must be applied by the court in determining whether to grant permission, see Keay A and Loughrey J ‘Something old …’, above n 6, at 479–497.

144. In Parry v Bartlett [2011] EWHC 3146 (Ch), counsel for the defendant director argued that mere ratifiability was sufficient to require permission to continue the claim to be refused. Although clearly erroneous, the judge dealt with this only by finding that the wrong in question was not ratifiable.

145. Section 239 also makes clear that ratification must be effected by the members, resolving a long-standing controversy over whether directors (who will usually have been delegated the task of managing the company and will accordingly have the authority to decide, positively, that the company shall sue) should also have the power to ratify a wrong; see Sealy Ls ‘The director as trustee’ [1967] 25 Camb L J 83 at 102–103; Payne, above n 10, at 608; Koh, above n 94, at 382–384.

146. This is generally assumed to be so (see eg Kershaw, above n 89, p 613), although the Act is silent as to the process for granting authorisation.

147. See clause 216(4).

148. See ss 252–256.

149. [2008] BCC 885.

150. Companies Act 2006, s 263(4) requires the court, when deciding whether to give permission to a claimant to continue a derivative claim, to have ‘particular regard … to the views of members of the company who have no personal interest, direct or indirect, in the matter’. For judicial interpretation of that wording, see Iesini v Westrip Holdings Holdings Ltd, above n 81, at 450–451, para 129.

151. The Law Commission (above n 126, para 16.35) favoured making ratification a merely discretionary factor. However, by the time it published its Report (above n 3, para 6.84), its attitude had changed, and it recommended that ratification should be an absolute bar.

152. For parliamentary acknowledgement of the common-law-preserving nature of clause 216 of the bill, which became s 239 of the Act, see Hansard HC Deb col GC368 9 February 2006.

153. See s 180(4), which provides that ‘[t]he general duties (a) have effect subject to any rule of law enabling the company to give authority, specifically or generally, for anything to be done (or omitted) by the directors, or any of them, that would otherwise be a breach of duty’.

154. Above n 58.

155. Indeed, given its irrevocable nature, a decision to ratify should arguably require a more demanding process, especially in terms of the information held by shareholders, than should a decision not to sue.

156. See eg Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656; Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286.

157. Kershaw seems to take a somewhat different view (above n 89, p 654). His argument is that, assuming that fraud is only unratifiable where ratification would involve ‘oppression’ of the minority, then the requirement of an unconnected vote under s 239 effectively precludes such oppression. The difficulty that Franbar below presents for this argument is not considered.

158. [2008] BCC 885.

159. Besides its derivative claim, Franbar also brought proceedings for breach of a shareholders' agreement, and under Companies Act 2006, s 994 (for unfair prejudice).

160. Under s 263(3)(d).

161. One reason for this, according to the evidence of Franbar, was that one of the motives for the directors' misbehaviour towards Medicentres was to drive down its value, and thus the price that would be payable by CP if it exercised its option to acquire Franbar's shares. Forcing the directors to reimburse the company would increase its value and thus the price payable by CP.

162. Above n 159, para 42, emphasis added.

163. As noted above, acts might be incapable of ratification on other grounds; see above n 19 and the text therewith.

164. He accordingly rejected an argument by counsel for the defendants that the requirement of an unconnected ratification in s 239(4) had effectively replaced all earlier common law rules regarding which wrongs were incapable of being ratified.

165. Franbar, above n 159, para 45.

166. Ibid, para 47.

167. Ibid, emphasis added.

168. Ibid, para 45.

169. Ratifiability was also briefly discussed in Parry v Bartlett, above n 145, paras 78–82. It was held that the misconduct was unratifiable, and this conclusion was arrived following a (very brief) discussion of the common law doctrine on fraud on the minority. However, since the company was owned 50/50 between the claimant and the defendant director, and since the latter would clearly be unable to vote on any ratification, the conclusion that the misconduct was ‘unratifiable’ may have meant no more than that the misconduct was unlikely to be ratified.

170. See above, n 41.

171. See above, n 20.

172. See the comments of Lord Reid in the decision of the Inner House in Wishart v Castlecroft Securities Ltd [2010] BCC 161, 196–197 [para 38], that the requirement of wrongdoer control, which had ‘given rise to difficulty in a number of cases’, is not repeated in the Act.

173. See, for example, the comments of Judge Pelling QC in Stimpson v Southern Private Landlords Association [2009] EWCH 2072 [46] that the absence of wrongdoer control was a factor to take into account in deciding whether to grant permission to continue a derivative claim. Note also the cases of Cinematic Finance Ltd v Ryder [2012] BCC 797 and Bamford v Harvey [2012] EWHC 2858 (Ch) in which the courts refused permission to continue derivative claims where the claimant shareholder had sufficient control within the company to ensure that the company itself could sue, obviating the need for derivative proceedings.

174. See the excellent analysis offered by Kershaw D ‘The rule in Foss v Harbottle is dead; long live the rule in Foss v Harbottle’ (2013) Lse Law, Society and Economy Working Papers 5/2013, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2209061 (accessed 29 July 2013).

175. Specifically clause 216; see above, text with nn 149.