Fifteen years of the statutory derivative regime under the Companies Act 2006: a reflection on an unfulfilled superfluous statutory regime

This article explores the effectiveness of the codification of the statutory derivative regime as a remedy to members/shareholders of a company to which a wrong has been committed by those in charge – the directors – and no steps have been taken by the company to seek a remedy. This is to assess whether a derivative action as a shareholder remedy has been effective, since its codification in the Companies Act 2006 15 years ago, as a means of enhancing public confidence in the business/corporate sector, and as a way to reassure investors that directorial mismanagement/abuse of office leading to loss or harm to shareholders could be punished.
The article analyses the relationship between directors’ breach of their statutory duties and corporate insolvency, premised on the contention that where directors are well regulated and governed in the execution of their duties, corporate insolvency may be avoided and shareholder actions, such as derivative claims, would be rare. The article concludes with an analysis of whether the statutory derivative regime has indeed, or has not, fulfilled its purpose of simplifying access and enhancing shareholder remedies as initially recommended by the Jenkins Committee and taken forward by the Cork Committee Report leading to its codification in the CA 2006.

This is the author-produced PDF of an article, accepted for publication in Contemporary Issues in Law, following peer review. The Version of Record Nsubuga, Hamiisi Junior (2023) Fifteen years of the statutory derivative regime under the Companies Act 2006: a reflection on an unfulfilled superfluous statutory regime. Contemporary Issues in Law, 15 (1) , 3. pp. 63-82 is available in Contemporary Issues in Law, 15 (1), pp. 63-82.
Licensed under CC BY-NC-ND 3.0.