MRL 2601 ASSIGNMENT 1

QUESTION 1 According to section 165 of the derivative action act, the shareholder are to take the following steps: Demand (notice) to company The shareholder can deliver a notice to a company demanding that it institute legal proceedings or take other steps to protect the company’s legal interests. Company action Within 15 days of the company being served with the demand, the company may move forward and apply to the court to set the demand aside only if the demand is “frivolous, vexatious or without merit” (Delport: 2014, pg. 250). If the court refuses to accept the demand, the company will need to appoint either an impartial person or committee to inquire about the matter at hand. The company’s investigation team is given 60 days to resolve the dispute in order to protect the interest of the company or by serving a legal notice against the person who instituted the demand. Personal derivative action The person who made the demand may apply to the court for leave to continue with proceedings in the name of or on behalf of the company if:  the company failed to take steps as required;  the company appointed a person or committee that is not independent;  the company accepted an inadequate report; 3  The company acted in a way inconsistent with the reasonable report of an independent, impartial investigator; or  The company has served a refusal notice. Courts discretion The court may grant leave to the applicant if:  The applicant for leave is acting in good faith  The proposed or continued proceedings involve the trial of a serious question of This study source was downloaded by from CourseH on :25:02 GMT -05:00 This study resource was shared via CourseH material consequence to the company  It is in the best interest of the company that the applicant be granted leave to commence the proposed proceedings. Furthermore, the court may grant leave only if it is satisfied that:  The delay required for the required procedures may result in; - Irreparable harm to the company or, - Substantial prejudice to the interests of the application or another person,  There is a reasonable probability that the company may not act to prevent that harm or prejudice, or protect the interest of the company,  That the courts are satisfied with the above requirements. Interests of the company Granting leave is said to not be in the best interest of the company if:  The proposed proceedings are- - By the company against a third party; or 4 - By a third party against the company; and  The company has decided - Not to bring the proceedings; or - Not to defend the proceedings; or - To discontinue, settle or comprise the proceedings; and - To discontinue, settle or comprise the proceedings; and  All the directors who participated in that decision- - Acted in good faith for a proper purpose; and - Did not ha