Foss v. Harbottle 1
Principles and Applications and Exceptions to the Principles

INTRODUCTION Basically, both under the general law and under the Companies Acts there are some protections of minority. Example of minority protection is the doctrine under the general law that the majority of the members must not commit a fraud on minority but must act bona fide for the benefit of the company as a whole. Here, the topic that I am about to touch is the rule of Foss v. Harbottle in which there are some exceptions to this particular rule protect the minority. As for the beginning, Foss v. Harbottle was originally a case reported in 1843. The Victoria Park Company was established for the purpose of ‘laying out and maintaining an Ornamental Park within the Township of Rusholme, Charlton-upon Medlock and Moss Side, in the country of Lancaster’. The capital of the company was to be $500,000, divided into 5,000 shares of $100 each. It was to be controlled by five shareholders. The first directors were Thomas Harbottle, Joseph Adshead, Henry Byrom, John Westhead and Richard Bealey. It was provided that three directors should constitute a board and that the acts of three or more should be as effectual as if done by the five. To sum up the feature of the case, two shareholders in the company, Richard Foss and Edward Turton, brought an action against the company’s directors, on behalf of themselves and the other shareholders except the defendants. The defendants were the five directors, a shareholder, who was not a director, the company’s solicitor and its architect. The plaintiffs alleged that the defendants had affected various fraudulent and illegal transactions which the property of the company had been misused. In respect of the base rule in corporate law, a corporation has a legal existence separate from its shareholders. Thus, a shareholder cannot be sued for the