Derivative Claim Solicitors
Harcourt Stirling Solicitors provides expert legal advice for shareholders seeking to protect their company from director misconduct and breaches of duty.
You don’t have to navigate complex commercial disputes alone—start with a straightforward, free initial consultation with a derivative claim lawyer to understand your rights, responsibilities, and options.
Why choose Harcourt Stirling Solicitors for your derivative claim?
Concerns about director conduct — such as negligence or misuse of company assets — can significantly affect a business’s value and stability.
When a director is suspected of breaching their duties or misusing company property, it is the company itself that may suffer the loss. However, if the directors in the wrong also control the board, it is often necessary for a shareholder to initiate a derivative claim to protect the company’s interests and seek restitution.
Derivative actions under the Companies Act 2006 involve complex legal hurdles, including the requirement to obtain court permission before a claim can proceed. Whether the issue involves the diversion of corporate opportunities, the misuse of company funds, or a breach of fiduciary duty, our derivative claim solicitors can help.
Our aim is to help you assess the conduct in question and, where appropriate, take steps to protect the company’s interests. Harcourt Stirling Solicitors provides clear guidance on the merits of your claim. We help clients across England and Wales from our office in Brentford. We focus on a clear, solution-oriented approach designed to protect the integrity of your business and resolve disputes efficiently.
- Professional and Transparent: Harcourt Stirling Solicitors is proud to have earned positive client feedback on Google and Trustpilot, reflecting our professionalism, expertise, and responsive service.
- Knowledgeable Team: Our solicitors have experience in commercial law, including cases involving allegations that directors have prioritised personal interests over their statutory duties.
- Structured Strategy: We conduct a rigorous analysis of the alleged misconduct to help satisfy the court’s “legal test,” aiming to present a strong case for why the claim is in the best interests of the company.
- Accessible Support: Based in Brentford, our derivative claim solicitors assist clients across England and Wales and offer remote consultations for your convenience.
How Harcourt Stirling Solicitors supports your derivative claim
At Harcourt Stirling Solicitors, we provide clear, strategic advice to help you address concerns about internal conduct that may be harming the company.
Whether you are concerned that a director may be diverting business opportunities, misusing company assets, or acting in their own interests, we support you through each stage of the derivative action process with a structured, evidence‑led approach.
- Free initial consultation – We begin by understanding the nature of the misconduct and the evidence of the breach of duty. This early discussion helps clarify whether a derivative claim is the most effective tool for your situation or if an alternative—such as an unfair prejudice petition—is more appropriate.
- Case assessment and strategy – Our derivative claim solicitors assess the strength of the “prima facie” case. We assess which statutory duties may be engaged and outline the strategic options available to protect the company’s position.
- The permission stage (the gatekeeper) – Unlike standard litigation, we must first apply to the Court for permission to continue the claim. We guide you through this two-stage test, preparing the evidence needed to demonstrate that the claim may be in the company’s best interests.
- Progressive dispute resolution – Where possible, we seek to resolve the matter in a commercially focused manner to avoid prolonged litigation. Depending on the circumstances, this may include:
- Internal negotiation & mediation – Attempting to reach a settlement or restitution agreement that avoids the costs of a full court hearing.
- Settlement & share purchase agreements: While a derivative claim seeks a remedy for the company, many disputes are resolved by one party exiting. We can draft structured settlement and share purchase agreements to facilitate a clean break. Additionally, we can apply for a Wallersteiner order, requiring the company to indemnify you for your legal costs, as the claim is brought for the company’s benefit.
- Court proceedings (the petition) – If the “permission stage” is successful and the directors refuse to settle, we provide expert representation through to the final court hearing.
- Evidence gathering – We assist in reviewing the documents that form the core of a derivative action, including board minutes, accounting records, contract diversions, and evidence of secret profits. Our aim is to help ensure all evidence is preserved and presented effectively to satisfy the court.
- Representation and support – We act on your behalf in discussions with the board and other stakeholders. Throughout the process, we keep you informed so you can make decisions with clarity, focusing on the ultimate goal: the recovery of assets for the company.
- Resolution – We work towards a fair and practical outcome, whether that involves a court-ordered repayment to the company, the setting aside of a fraudulent contract, or a negotiated settlement aimed at improving or protecting the company’s position.
Speak to a derivative claim solicitor today!
What makes a strong derivative claim?
In many cases, minor management errors can be resolved through board meetings or internal votes. However, when a director’s conduct moves from a difference of opinion to a potential breach of duty that could damage the company’s value, a derivative claim may be the appropriate route to protect the company’s interests.
Because the court must grant permission before the case can fully proceed, building a robust “prima facie” case from the outset is essential. While every case is unique, several factors typically strengthen a derivative claim:
- Evidence of actual or proposed misconduct – You do not necessarily have to wait for the damage to be done. A claim can be brought for an actual or proposed act. If you have evidence that a director is about to divert a company asset or sign a fraudulent contract, you can act immediately to seek an injunction.
- Documented proof of a breach of duty – Evidence is the foundation of any claim. This includes board minutes, financial records, and emails that demonstrate a director may have prioritised their own interests over the company’s, or has acted with actionable negligence.
- A clear “loss to the company” – Whether the loss is tangible (cash/assets) or an “opportunity loss” (an opportunity diverted to a director’s separate business), being able to quantify the damage — or the potential damage — can significantly strengthen the claim.
- Evidence of “Independent” board failure – You must demonstrate that the board is either unwilling or unable to bring the claim themselves. If the directors in the wrong hold the majority of votes or “control” the decision-making process, it strengthens the argument that a derivative action may be the appropriate mechanism.
- Satisfying the Section 263(2) Criteria – A robust claim anticipates the mandatory bar the court must apply at the permission stage. Specifically, under Section 263(2) of the Companies Act 2006, the court must refuse permission if it is satisfied that a person acting in accordance with the Section 172 duty (to promote the success of the company) would not seek to continue the claim. We focus on proving that the potential recovery for the company significantly outweighs the litigation risk and cost.
- Prompt action and “clean hands” – In cases of proposed wrongdoing, speed is critical. Acting quickly may allow the court to freeze assets or stop contracts before they are signed. Furthermore, the court will assess whether you, as the claimant, are acting in good faith for the company’s benefit.
- Strategic Use of Wallersteiner Orders – Identifying the need for a costs indemnity early on can be an important consideration in a well‑prepared claim. If you can show that it is fair for the company to fund the litigation, it may help reduce the financial burden on the shareholder bringing the claim and puts pressure on the wrongdoing directors.
Your rights and options in a derivative claim
While a derivative claim is brought on behalf of the company, the Companies Act 2006 grants you, as a shareholder, specific legal mechanisms to intervene where there are concerns about how the company is being managed.
Understanding these rights is the first step in deciding whether to pursue a formal claim or seek a private resolution.
Legal rights of a company member
As a member of the company, the Companies Act 2006 grants you specific legal entitlements to intervene when the business is being mismanaged or its assets are at risk:
- The right to initiate proceedings: Under Section 260, you may apply to bring a claim under Section 260 for negligence, default, or breach of duty, even if the board does not take action. The court must grant permission before the claim can proceed.
- The right to seek preventative relief: You have the right to apply for an injunction to halt a threatened or proposed act—such as a transaction involving company property—before the company suffers a loss.
- The right to information: To help substantiate a claim, members have the right to inspect certain company records, including the register of members and minutes of general meetings.
- The right to a costs indemnity (Wallersteiner Rights): You may ask the court to order the company to contribute to your legal costs (a Wallersteiner order), so that a member is not unfairly burdened with the expense of bringing a claim intended to benefit the company.
Possible strategic options for resolving a derivative claim situation
- Negotiated restitution: Often, the credible threat of a derivative claim is enough to encourage a director to return funds, resign, or reach a settlement to avoid formal proceedings.
- Mediation and ADR: We can engage a neutral third party to facilitate a settlement. This might involve the director paying damages to the company or restructuring the board to include independent oversight.
- Combining with an Unfair Prejudice Petition: You have the option to “dual-track” your claim. By bringing a derivative claim alongside a Section 994 petition, you can seek personal relief (such as a share buy‑out) while also pursuing remedies on behalf of the company.
- Governance reform: In some cases, the best option is to use your rights to seek changes to the Articles of Association or shareholders’ agreement to introduce additional safeguards to help prevent future misconduct.
Speak to a derivative claim solicitor today!
How to start your derivative claim with Harcourt Stirling Solicitors
Addressing concerns about director conduct or potential breaches of duty can feel daunting, but having the right legal guidance from the outset is essential for protecting the business and your investment.
At Harcourt Stirling Solicitors, we provide members and shareholders concerned about company conduct with clear, practical advice to help you understand your rights and take informed steps toward a resolution.
- Contact us – Get in touch by phone, email, or via our online enquiry form to discuss your situation with an experienced derivative claim specialist. This initial consultation is free and obligation-free, giving you early guidance on whether the situation may meet the threshold for a claim on behalf of the company.
- Prepare your case – Should you wish to proceed, we will guide you on gathering the necessary evidence. This includes the company’s constitutional documents and evidence relevant to the alleged breach of duty, such as emails, financial records, or proof of diverted opportunities. Before we begin substantive work, we will complete standard identity and anti-money laundering checks (KYC/AML), which typically involves providing a form of ID and proof of address.
- Case assessment and strategy – Once your documents are reviewed, our solicitors will evaluate the key legal issues. We will explain your rights under Section 260 and outline the most suitable course of action—whether that involves a formal “Letter of Claim” to the board, applying for an urgent injunction to stop an impending breach, or preparing the “prima facie” evidence required for the court’s permission stage.
- Take action – Once a strategy is agreed upon, we act on behalf of the company (through your application) at every stage. We handle all communication with the directors and their legal representatives, presenting your position professionally and working towards outcomes that support the long‑term health of the business.
Harcourt Stirling Solicitors is committed to helping members resolve corporate disputes efficiently, strategically, and with the confidence that the company’s commercial interests are being prioritized.
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Frequently Asked Derivative Claim Questions
What is a derivative claim?
A derivative claim is a specialised legal action brought by a company member on behalf of the company, rather than for their own personal benefit. Under Section 260 of the Companies Act 2006, this mechanism allows you to step into the “shoes of the company” to address concerns about director conduct that may have caused financial or reputational harm to the business.
In most cases, the board of directors decides whether to take legal action. However, where the directors concerned are themselves involved in the alleged breach of duty, a derivative claim allows a member to ask the court for permission to pursue the claim on the company’s behalf and take steps to protect the company’s assets where the board is unable or unwilling to act.
What are the grounds for bringing about a derivative claim?
A derivative claim cannot be brought for simple disagreements over business strategy. To apply for the court’s permission, you must demonstrate that a director’s conduct may fall within one of the following legal grounds:
- Negligence: A failure to act with the reasonable care, skill, and diligence expected of a reasonably diligent director.
- Default: A failure to perform a legal or statutory obligation required by the Companies Act 2006.
- Breach of duty: A breach of any of the statutory directors’ duties, such as the duty to promote the success of the company.
- Breach of trust: Using company assets or authority in a way that benefits themselves or a third party rather than the company.
What are examples of derivative claims?
In practice, these legal grounds usually arise in specific, high‑stakes scenarios. Common examples of when a derivative claim may be used to protect a company include:
- Diverting opportunities: A director diverting a lucrative contract or client to a separate business they are involved in, rather than offering it to the company.
- Asset stripping: Selling company equipment, property, or intellectual property to an associate at a significant undervalue.
- Unauthorised payments: A director awarding themselves an excessive bonus or taking an interest‑free loan without the required board or member approval.
- Conflicts of interest: Entering the company into a contract with another business in which the director has an undisclosed or unmanaged personal interest.
- Reckless investment: Committing the company’s capital to a high‑risk project without proper due diligence, exposing the business to unnecessary financial risk.
Note on proposed acts: You do not have to wait for the damage to occur. If you have evidence that a director is about to take one of the steps above, you may be able to apply for an urgent injunction to prevent the act before any loss occurs.
Who can bring about a derivative claim?
Under the Companies Act 2006, the right to bring a derivative claim is not restricted by the size of your shareholding. Whether you own 1% or 51% of the company, you may have standing to act if you believe the directors may have breached their duties.
The law defines a “member” broadly to ensure that stakeholders are not prevented from taking action due to administrative delays or life events. You can typically bring a claim if you fall into any of the following categories:
- Registered members: Any individual or corporate entity whose name is currently entered on the company’s official register of members.
- New shareholders: It does not matter whether the conduct occurred before or after you became a member. If the company is affected by an ongoing issue, you may still be able to apply for permission to bring a claim.
- Transferees of shares: If shares have been transferred to you (for example, through a private sale) but the register has not yet been updated, you may still have standing to initiate a claim.
- Successors by law: If you have acquired shares through operation of law — such as acting as an executor or trustee in bankruptcy — you inherit the right to apply for a derivative action on the company’s behalf.
Can majority shareholders bring a derivative claim?
Yes. While derivative claims are most commonly used by minority shareholders who lack the voting power to remove a director, majority shareholders are not barred from using this route. If a majority owner is contractually or procedurally prevented from taking direct board action, a derivative claim may still be available to protect the company’s interests.
The “good faith” requirement
Because you are acting on behalf of the company, the court will assess your motives at the permission stage. To proceed, you must demonstrate that you are acting in good faith — meaning your primary aim is to protect the company’s interests, rather than pursuing a personal grievance or an ulterior commercial motive.
How do I start a derivative claim?
Starting a derivative claim is a more technical process than standard litigation because you are effectively asking the court for permission to represent the company:
- Initial Consultation – Harcourt Stirling Solicitors offers a free initial consultation to help you understand the nature of the misconduct and the evidence of the breach of duty. This early assessment clarifies whether a derivative claim is the most effective tool for your specific situation.
- The Permission Stage – Unlike standard litigation, you must first apply to the Court for permission to continue the claim. The Court acts as a gatekeeper, deciding if the claim is genuinely in the best interests of the business and if it is being made in good faith. If the Court is not satisfied that these criteria are met, it will not allow the claim to proceed formally.
- Formal Litigation & Recovery – If permission is granted, you may begin formal litigation to recover assets or seek restitution for the company. Harcourt Stirling Solicitors provides expert representation throughout this process, ensuring the company’s interests are protected.
- Settlement & Mediation – It is worth noting that you can also attempt to negotiate internally or use mediation to settle the issue out-of-court first. This is a strongly encouraged outcome, as it provides a faster, more confidential, and cost-effective resolution for all parties involved.
What are the remedies of a derivative claim?
Because a derivative claim is brought on behalf of the company, the remedies are designed to “make the company whole” rather than provide a personal payout to the shareholder.
- Damages and compensation: The Court may order a director to pay a sum of money to the company to cover losses arising from a breach of duty or other actionable conduct.
- Rescission of contracts: If a director has entered the company into a contract involving a conflict of interest, the Court can set aside or “undo” the agreement, restoring the parties to their previous position.
- Restoration of property: If company assets (such as vehicles, intellectual property, or land) have been transferred to a director or third party, the Court may order that the property be returned to the company.
- Restitution and account of profits: If a director has made an unauthorised profit — for example, receiving a payment or benefit connected to their role — the Court may order them to account for that profit and repay it to the company.
- Declaratory relief: A formal statement from the Court confirming whether a director has breached their duties. While not a financial remedy, it can support further steps regarding governance or board composition.
- Injunctions (preventative relief): You do not have to wait for loss to occur. The Court may grant an injunction to prevent a proposed act that could harm the company, such as transferring a trademark or selling a key asset.
What are examples of cases involving derivative claims?
Mission Capital Plc v Sinclair [2008]
- The Scenario: Two executive directors (the Sinclairs) were dismissed from the board following a disagreement over financial forecasts. They brought a derivative claim against the remaining directors, alleging that their dismissal had harmed the company.
- The Dispute: The Sinclairs argued that the company would suffer because it had lost key management. They sought permission to sue the other directors on the company’s behalf and to be reinstated to their roles.
- The Outcome: The High Court refused permission, finding that the claim did not meet the statutory threshold required to proceed.
Durnont Enterprises Ltd v Fazita Investment Ltd [2024]
- The Scenario: A minority shareholder (owning 27.9%) of a Cypriot‑based company alleged that assets worth over €100 million had been diverted to entities connected with other shareholders.
- The Legal Twist: This was a complex cross‑border dispute. The High Court initially granted permission for the claim to proceed against several shareholders, indicating that English courts may have jurisdiction to hear derivative claims involving foreign companies where there is a substantial connection to the UK.
- The Outcome: The Court of Appeal later refined the scope of the claim, dismissing it against certain directors where there was insufficient evidence linking them to the alleged conduct.
How long does it take to resolve a derivative claim?
The duration of a derivative action depends heavily on whether the case settles early or proceeds to a full trial. On average, a contested claim that runs its full course can take between 18 months and 2 years, though key milestones occur much sooner.
Phase 1: Pre‑Action (2–4 months)
Before any court papers are filed, the parties must follow the Pre‑Action Protocol for Commercial Disputes.
- Investigation: The member gathers evidence relevant to the alleged breach.
- Letter of Claim: A formal letter is sent to the directors, giving them a set period (usually 30–90 days) to respond. Some claims may resolve at this stage if the issues are clarified and the parties reach a commercial agreement.
Phase 2: The Permission Stage (4–8 months)
This is the unique “filter” stage of a derivative claim.
- Prima facie case: Once the claim is filed, the court first reviews the papers to decide whether there is a basic case to answer. Claims may be dismissed at an early stage if the court considers them to lack merit.
- Permission hearing: If the claim passes the initial review, a judge will hold a hearing to decide whether the claim is in the company’s best interests. Depending on court availability, this usually takes place 4–6 months after issue.
Phase 3: Standard Litigation (12–18 months)
If the court grants permission, the case follows the usual High Court litigation process:
- Disclosure: Both sides exchange relevant documents.
- Witness statements & expert reports: Evidence is prepared for trial.
- Trial: A final hearing where a judge makes a binding decision.
Factors influencing the timeline
- Urgent injunctions: If company assets appear to be at immediate risk, the court may consider an urgent interim injunction, sometimes within 24–48 hours, to prevent potential harm.
- Complexity of evidence: Cases involving large volumes of data, forensic accounting, offshore structures, or complex corporate arrangements can take longer to prepare.
- Mediation and settlement: Parties are encouraged to use alternative dispute resolution at any stage. A successful mediation can resolve a potential two‑year dispute in a single day.
- Court backlogs: Timelines depend heavily on the capacity of the Business and Property Courts, particularly for permission hearings and trial listings.
Can the board fire me for bringing a derivative claim?
The answer depends on whether you are being targeted in your capacity as a shareholder or as an employee.
1. Can they take your shares?
In short: No. The board of directors does not have the inherent power to remove you as a shareholder or require you to give up your shares simply because you have brought a claim.
- Property rights: Your shares are your personal property. Unless the Articles of Association or a shareholders’ agreement contain a specific compulsory‑transfer clause (usually linked to employment, not litigation), the board generally cannot interfere with your ownership.
- Unfair prejudice: If the board attempts to dilute your shares or change company rules in a way that targets you, this may give rise to an unfair prejudice petition under Section 994, which can provide remedies where a shareholder is treated unfairly.
2. Can they fire you from your job?
If you are also an employee or executive director, the position is more nuanced.
- Employment law protection: Bringing a derivative claim is a legal mechanism. If you are dismissed solely for exercising this right, it may raise issues of unfair dismissal or, in some cases, protected disclosure, depending on the nature of the concerns raised.
- Retaliation risks: While a board might attempt to justify dismissal on grounds such as “loss of trust and confidence,” courts will examine the reasons carefully, particularly where the timing suggests retaliation.
3. Can they remove you as a director?
If you are a director bringing a claim against fellow board members:
- Statutory power: Shareholders holding more than 50% of the voting rights can remove a director under Section 168 of the Companies Act 2006.
- Quasi‑partnership considerations: In smaller, owner‑managed companies, the court may consider whether there was an underlying understanding that you would participate in management. If so, removing you may be treated as unfair, and the court may grant relief — which can include preventing removal or ordering a fair buy‑out.
How does the free initial consultation work?
Harcourt Stirling Solicitors offers a free initial consultation to discuss your derivative claim. The free initial consultation lasts up to 30 mins and is completely free.
It allows you to speak with a commercial litigation specialist, learn about your options, and ask any questions you may have.
Harcourt Stirling Solicitors understand how difficult it can be to speak about sensitive and confidential shareholder matters during the normal working day – and so you can email us (or fill out the contact form) at any time and we’ll do our best to respond to your enquiry.
How can I contact Harcourt Stirling Solicitors?
You can give us a call at 020 3627 6074 from Monday to Friday 9:00 AM to 5:30 PM and one of our solicitors will be happy to assist you.
Alternatively, you can fill out the contact form on our website and we’ll do our best to respond to your enquiry as soon as we can.