Rule in Foss v Harbottle Law and Legal Definition

Rule in Foss v Harbottle is a leading English precedent in corporate law. According to this rule, the shareholders have no separate cause of action in law for any wrongs which may have been inflicted upon a corporation. The rule is named after the 1843 case in which it was developed. The rule was later extended to cover cases where what is complained of is some internal irregularity in the operation of the company. However, the internal irregularity must be capable of being confirmed / sanctioned by the majority. The rule is now subject to several important exceptions like 'derivative action', which allows a minority shareholder to bring a claim on behalf of the company. This applies in situations of 'wrongdoer control.’