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The Rule in Foss v. Harbottle

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The Rule in Foss v. Harbottle
Case: Foss v Harbottle (1843) 2 Hare 461
Two shareholders of a company brought action against directors of the company for misapplication and improper use of the company’s property.

The court held that as the injury complained of was injury to the company and not to the members. As such the members could not take action. Only the company had the right to sue.

Case:In the case of Re Noel Tedman Holdings Pty Ltd. (1967) QdR 561;
The company had a husband and a wife as its only shareholders. They were also the company’s directors. They died in an accident, leaving behind an infant child. After their death the company still existed. The problem that arose was, as the shareholders and directors had died, the shares could not be transferred as according to the will of the deceased to the infant child.

The court thus allowed the personal representative of the deceased to appoint directors of the company, so that these directors could allow the transfer of the shares to the child.

Case:Whaley Bridge Calico Printing Co v Green (1880) 5 QBD 109
A promoter negotiated the sale of a business from the seller to the company which he was intending to form. The seller agreed to pay a share of the profit he received from the sale to the promoter.

It was held that the promoter was accountable to the company for that profit.
In an attempt to define the term "promoter", Bowen J said:
"The term promoter is a term not of law, but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence.

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