Foss vs. Harbottle 1843

     Two minority shareholders in a company alleged that its directors were guilty of buying their own land for the company’s use and paying themselves a price greater than its value.  This act of the director resulted in a loss to the company. The minority shareholders, therefore, decided to take an action for damages against the directors. The shareholders in general meeting by majority resolved not to take any action against the directors alleging that they were not responsible for the loss, which had been incurred.

     The Court dismissed the suit on the ground that the acts of directors we capable of confirmation by the majority of members and held that the proper plaintiff for wrongs done to the company is the company itself and not the minority shareholders. It further held that the company could act only through its majority shareholders.

     The Court while delivering judgment, opined that the company alone would have the cause of action, and not the minority shareholders.