RECONCEPTUALISING SHAREHOLDER REMEDIES TO MITIGATE THE PROBLEMS CAUSED BY THE OVERLAP BETWEEN SECTION 994 AND PART 11 COMPANIES ACT 2006

The contemporary paradigm relating to shareholder remedies under English company law identifies a fundamental overlap between the Section 994 and Part 11 of the Companies Act 2006. The underlying cause of the overlap is that an alleged breach of directors’ duties can establish a claim under both remedial jurisdictions. This article argues the overlap between the jurisdictions generates three undesirable consequences. First, shareholders have used s.994 to obtain personal relief on a corporate claim, as opposed to pursuing a derivative claim for corporate relief. Second, s.994 has been used to obtain corporate relief on a corporate claim, instead of bringing a derivative claim. Third, shareholders can exploit s.994 to obtain an order authorising a derivative claim, effectively circumventing the threshold test in Pt 11. The article explores the undesirable impact of these consequences for English company law. In each case, the article recommends three reform proposals which, if implemented, would reconceptualise shareholder remedies under English company law and mitigate the problems caused by the overlap between s.994 and Pt 11. A. INTRODUCTION Fundamental to the concept of shareholder remedies under English company law is the phenomenon that ‘directors owe their fiduciary duties to the company; not to the shareholders’. The phenomenon leads to the inference that breaches of directors’ duties are wrongs committed against the company, in respect of which the company may commence a claim against the directors for corporate redress, by applying the proper plaintiff rule in Foss v Harbottle. Alternatively, a shareholder can commence a derivative claim to obtain redress for the company under Part 11 of the Companies Act 2006 (CA 2006). In respect of personal wrongs, a shareholder can rely on the unfair prejudice remedy under Section 994(1) CA 2006, to obtain personal, but not corporate, relief. In the event a petitioner seeks personal relief for a corporate loss, the court must, ideally, strike out the claim as contrary to the ‘no reflective loss’ rule. *Shenara Sewwandhee Perera, LLM Corporate Law (Distinction), University College London; LLB (Hons), University of Southampton. The author may be contacted at: t.perera.17@ucl.ac.uk. I am thankful to Professor Brenda Hannigan for her guidance, Professor Carsten Gerner-Buerle and Professor Paul Davies for marked feedback, Rabiya Khawaja, Andrew McLean and Joyman Lee for editorial support. 1 Companies Act 2006, s 170(1) (CA 2006); Percival v Wright [1902] 2 Ch 421. 2 (1843) 67 ER 189, (1843) 2 Hare 461. Refer section B(1) for a brief account of the rule. 3 Refer section B(2) for a brief account of the remedy. 4 Refer section B(3) for a brief account of the remedy. 5 Jennifer Payne, ‘Shareholders' Remedies Reassessed’ (2004) 67(3) Modern Law Review 500. 6 Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch 204, [1982] 1 All ER 366367. Refer section B(4) for a brief account of the rule. UCL Journal of Law and Jurisprudence 2 The conventional paradigm that corporate claims are inherently within the ambit of the derivative jurisdiction and that s.994 is a personal remedy for shareholders’ personal claims, has been a subject of significant ambiguity. The contemporary paradigm relating to shareholder remedies identifies a fundamental ‘overlap’ between the s.994 and derivative claims jurisdictions. The underlying cause of the overlap is that ‘an alleged breach of directors’ duties can establish a claim under both remedial jurisdictions’. Therefore, the present article focuses on the debate on ‘directors as wrongdoers’, as opposed to third parties such as solicitors. Although a breach of directors’ duties owed to the company is primarily a wrong done to the company, shareholders can assert that such a breach is ‘conduct which is unfairly prejudicial to the interests of the members generally’. There is an extensive list of cases exhibiting courts’ acceptance that breaches of directors’ duties can establish a claim under s.994. Therefore, the article does not expand on the cause of the overlap. Rather, there are two primary objectives of the article. Firstly, I seek to signify that the overlap between the two remedial jurisdictions generates the following three undesirable consequences. A) Shareholders have used s.994 to obtain personal relief on a corporate claim, as opposed to pursuing a derivative claim for corporate relief. B) S.994 has been employed to obtain corporate relief on a corporate claim, instead of bringing a derivative claim. C) Shareholders can exploit s.994 to obtain an order authorising a derivative claim, effectively circumventing the threshold test in Pt 11 CA 2006. Secondly, in each case, I recommend three reform proposals that aim to mitigate the problems caused by the overlap between s.994 and Pt 11 CA 2006. Subsection 1 presents a summary of the three undesirable consequences and the reform proposals. 7 Andy Gray, ‘The Statutory Derivative Claim: An outmoded superfluousness?’ (2012) Company Lawyer 33(10) 296. 8 Charnley Davies Ltd (No. 2), Re [1990] BCC 625. 9 Lowe v Fahey [1996] 1 BCLC 262; Little Olympian Each-Ways Ltd (No.3), Re [1995] 1 BCLC 636; Allmark v Burnham [2005] 2 BCLC 437; Brenfield Squash Racquets Club Ltd, Re [1996] 2 BCLC 184; Lloyd v Casey [2002] 1 BCLC 454; Dalby v Bodilly [2005] BCC 627. 10 Re Cumuana Ltd [1986] BCLC 430; Grace Biagioli [2006] BCLC 70; Re McCarthy Surfacing Ltd [2009] 1 BCLC 622; Tobian Properties Ltd, Re Attwood v Maidment [2012] EWCA Civ 998, [2013] 2 BCLC 567. 11 That is, the same facts can give rise to two legal dimensions. 12 Atlasview Ltd v Brightview Ltd [2004] EWHC 1056 (Ch), [2004] BCC 542. 13 Clark v Cutland [2003] EWCA Civ 810, [2003] 2 BCLC 393; Anderson v Hogg [2002] BCC 923; Bhullar v Bhullar [2003] EWCA Civ 424, 2 BCLC 241; Gamlestaden Fastigheter AB v Baltic Partners Ltd [2008] 1 BCLC 468 PC (Jersey). 14 CA 2006, s.996(2)(c). Reconceptualising Shareholder Remedies to Mitigate the Problems Caused by the Overlap Between Section 994 and Part 11 Companies Act 2006 3 The remainder of the article is presented in four parts. Section B provides a summary of the core concepts and laws that underpin the research topic. Section C conducts a detailed case analysis to critically evaluate the impacts of utilising s.994 to obtain personal relief on a corporate claim and concludes by forwarding a mitigating solution to the issue. Section D deals with the concerns raised when utilising s.994 to obtain corporate relief on a corporate claim and concludes by recommending a workable legal framework to apply in those circumstances. Section E aims to signify the difficulties that arise as a result of utilising s.994 to authorise a derivative claim and concludes by providing a middle-ground solution to mitigate the adverse impacts. 1. The Three Undesirable Consequences: A Summary The first undesirable consequence generated by the overlap is the use of s.994 to seek personal relief on a corporate claim. This leads to the following predicaments. Firstly, where the court discards the ‘no reflective loss’ rule and orders personal relief to redress a corporate wrong, the shareholder obtains double recovery against the wrongdoing director. Secondly, ordering a personal remedy against the director in breach may consequently reduce the value of the company’s claim against the director. Thirdly, the proper plaintiff rule in Foss is discarded where the court allows the shareholder to petition for a corporate wrong. As a result, the ‘separate legal entity’ status of the company is undermined because the remedy for the corporate loss is directed towards a shareholder and not towards the company. Fourthly, where the shareholder opts for a personal remedy, and there is no claim commenced by or on behalf of the company, the law fails to cure the loss endured by the company. Consequently, to fully recover the loss sustained by the company, each shareholder would have to bring similar personal claims for the same corporate wrong, leading to an inefficient multiplicity of litigation, being costlier than if the court required a derivative action to be commenced. Moreover, where shareholders lack the resources to bring personal claims, justice for the corporate wrong will be denied altogether. Lastly, and most importantly, the article argues that in circumstances where the company is in the vicinity of insolvency, ordering personal relief for a corporate 15 Jennifer Payne, ‘Sections 459-461 Companies Act 1985 in flux: the future of shareholder protection’ (2005) 64(3) C.L.J. 647, 668. 16 Han-Christoph Hirt, ‘In What Circumstances Should Breaches of Directors’ Duties Give Rise to a Remedy under ss.459–61 of the Companies Act 1985?’ (2003) 24(4) The Company Lawyer 100, 109. 17 CA 2006, s 16. 18 Brenda Hannigan, ‘Drawing boundaries between derivative claims and unfairly prejudicial petitions’ (2009) 6 JBL 606, 616. UCL Journal of Law and Jurisprudence 4 wrong will directly and adversely affect the creditors' interests. To temper these adverse effects the article proposes an authoritative framework which uses the concept of ‘reflective loss’ as the underlying principle when dealing with petitions requesting personal relief on a corporate claim. In essence, the article submits that where the loss sustained is classified as a ‘mere personal loss’ the courts must require the petitioner to bring a derivative claim (as the ‘personal loss’ is ‘reflective of the loss endured by the company’ and redressing the company would redress the shareholder). If a shareholder seeks to secure a personal remedy based on a corporate claim, then he or she must successfully corroborate that the loss is ‘separate and distinct’ from the loss sustained by the company. The second undesirable consequence generated by the overlap – that is, the use of s.994 to seek corporate relief on a corporate claim – raises the following concerns. Firstly, it effectively undermines the sound policy underpinning the rule in Foss that ‘companies are collective associations’ and therefore the ‘decision of whether or not to litigate in respect of wrongs done to the company should be left to the majority’. Secondly, the article argues that allowing shareholders to obtain corporate relief via a petition is a regressive step as it will risk rendering the derivative action obsolete. Moreover, the article submits that the courts, by ordering corporate relief under s.994 have opened the floodgates to increased litigation by shareholders and intensified the risk of abuse of process. With the aim of mitigating these adverse impacts, the article puts forward a workable legal framework to apply when the issue of ordering corporate relief on a petition comes before the court. The framework requires the court to ascertain whether the alleged breach of duty is a ‘misconduct’ or a ‘mismanagement’. The article submits that a petitioner can obtain corporate relief only in respect of mismanagement claims provided that the additional hurdle can be surpassed. The additional hurdle asserts that firstly, it must be possible to determine the value of the director’s liability at the pleading stage. Secondly, the relief to be ordered must 19 ibid 618; McAskill v Fulton (2014) WL 8106597 [45] (Norris J). 20 Payne, ‘Sections 459-461 Companies Act 1985 Influx’ (n 15) 674. 21 Department of Trade and Industry, ‘Modern Company Law for a Competitive Economy: Developing the Framework’ (March 2000), [4.19], [4.67] (DTI: Developing the Framework). 22 Brian Cheffins, 'Reforming the Derivative Action: The Canadian Experience and British Prospects’ (1997) 1(2) CfiLR 259. 23 Charnley (n 8) 783. Reconceptualising Shareholder Remedies to Mitigate the Problems Caused by the Overlap Between Section 994 and Part 11 Companies Act 2006 5 correspond with the redress that the company could have secured had it sued or if a derivative claim was established. The third undesirable consequence generated by the overlap is the use of s.994 to obtain an order authorising a derivative claim. This practice raises the fundamental issue of creating two different threshold tests to bring a derivative claim. Simply, the threshold test under Pt 11 CA 2006 contains two permission stages which principally examine whether it is ‘in the interest of the company as a whole that the claim is pursued’. In apparent contrast to the position under Pt 11 CA 2006, the grounds on which derivative actions may be granted on petitions do not expressly include considerations relating to the company’s best interest. The Parliamentary intention behind placing the permission stages under Pt 11 CA 2006 was ‘to avoid opening a “Pandora's Box” to every disappointed shareholder’. 28 The critical argument is that using s.994 to authorise a derivative claim defeats this intention of the Parliament. The subsequent argument is that the authorisation of a derivative claim under s.994 discards the principle of majority in Foss because an individual shareholder decides whether or not to litigate, not the company. As a mitigating solution, the article puts forward a reform proposal which aims to retain the s.994 jurisdiction to authorise derivative claims, with the additional requirement that the section is utilised more in line with the Pt 11 CA 2006 requirements. B. BACKGROUND INFORMATION AND DEFINITIONS The section provides the information relating to the core concepts and laws that underpin the research topic. Subsection 1 explains the rule in Foss. Subsections 2 and 3 present a brief account of the two remedial jurisdictions. Subsection 4 rationalises the ‘no reflective loss’ rule.

The remainder of the article is presented in four parts. Section B provides a summary of the core concepts and laws that underpin the research topic. Section C conducts a detailed case analysis to critically evaluate the impacts of utilising s.994 to obtain personal relief on a corporate claim and concludes by forwarding a mitigating solution to the issue. Section D deals with the concerns raised when utilising s.994 to obtain corporate relief on a corporate claim and concludes by recommending a workable legal framework to apply in those circumstances. Section E aims to signify the difficulties that arise as a result of utilising s.994 to authorise a derivative claim and concludes by providing a middle-ground solution to mitigate the adverse impacts.

The Three Undesirable Consequences: A Summary
The first undesirable consequence generated by the overlap is the use of s.994 to seek personal relief on a corporate claim. This leads to the following predicaments. Firstly, where the court discards the 'no reflective loss' rule and orders personal relief to redress a corporate wrong, the shareholder obtains double recovery against the wrongdoing director. 15 Secondly, ordering a personal remedy against the director in breach may consequently reduce the value of the company's claim against the director. 16 Thirdly, the proper plaintiff rule in Foss is discarded where the court allows the shareholder to petition for a corporate wrong. As a result, the 'separate legal entity' status of the company is undermined because the remedy for the corporate loss is directed towards a shareholder and not towards the company. 17 Fourthly, where the shareholder opts for a personal remedy, and there is no claim commenced by or on behalf of the company, the law fails to cure the loss endured by the company.
Consequently, to fully recover the loss sustained by the company, each shareholder would have to bring similar personal claims for the same corporate wrong, leading to an inefficient multiplicity of litigation, being costlier than if the court required a derivative action to be commenced. 18 Moreover, where shareholders lack the resources to bring personal claims, justice for the corporate wrong will be denied altogether. Lastly, and most importantly, the article argues that in circumstances where the company is in the vicinity of insolvency, ordering personal relief for a corporate wrong will directly and adversely affect the creditors' interests. 19 To temper these adverse effects the article proposes an authoritative framework which uses the concept of 'reflective loss' as the underlying principle when dealing with petitions requesting personal relief on a corporate claim. In essence, the article submits that where the loss sustained is classified as a 'mere personal loss' the courts must require the petitioner to bring a derivative claim (as the 'personal loss' is 'reflective of the loss endured by the company' and redressing the company would redress the shareholder). If a shareholder seeks to secure a personal remedy based on a corporate claim, then he or she must successfully corroborate that the loss is 'separate and distinct' from the loss sustained by the company. 20 The second undesirable consequence generated by the overlapthat is, the use of s.994 to seek corporate relief on a corporate claimraises the following concerns.
Firstly, it effectively undermines the sound policy underpinning the rule in Foss that 'companies are collective associations' and therefore the 'decision of whether or not to litigate in respect of wrongs done to the company should be left to the majority'. 21 Secondly, the article argues that allowing shareholders to obtain corporate relief via a petition is a regressive step as it will risk rendering the derivative action obsolete. 22 Moreover, the article submits that the courts, by ordering corporate relief under s.994 have opened the floodgates to increased litigation by shareholders and intensified the risk of abuse of process. With the aim of mitigating these adverse impacts, the article puts forward a workable legal framework to apply when the issue of ordering corporate relief on a petition comes before the court. The framework requires the court to ascertain whether the alleged breach of duty is a 'misconduct' or a 'mismanagement'. 23 The article submits that a petitioner can obtain corporate relief only in respect of mismanagement claims provided that the additional hurdle can be surpassed. The additional hurdle asserts that firstly, it must be possible to determine the value of the director's liability at the pleading stage. Secondly, the relief to be ordered must correspond with the redress that the company could have secured had it sued or if a derivative claim was established. 24 The third undesirable consequence generated by the overlap is the use of s.994 to obtain an order authorising a derivative claim. This practice raises the fundamental issue of creating two different threshold tests to bring a derivative claim. 25

B. BACKGROUND INFORMATION AND DEFINITIONS
The section provides the information relating to the core concepts and laws that underpin the research topic. Subsection 1 explains the rule in Foss. Subsections 2 and 3 present a brief account of the two remedial jurisdictions. Subsection 4 rationalises the 'no reflective loss' rule.

The Rule in Foss
The rule in

The Unfairly Prejudicial Remedy
In the instance of the shareholder suffering a personal loss, redress to the shareholder which, the concept of reflective loss plays a pivotal role in mitigating the problematic outcomes discussed in subsection 2.

Personal Relief Under S.994 for Corporate Claims: A Case Analysis
The wrongful conduct in Atlasview involved a breach of directors' duties. The petitioners mounted the argument that such a breach is 'conduct which is unfairly prejudicial to the interests of members generally' and requested various remedies including damages. 55 The defendants requested the court to strike out the petition based on two credible counterarguments. Primarily, the alleged breach was 'not in respect of a duty owed to any shareholder', but a 'fiduciary duty owed to the company by directors' and therefore the proper plaintiff is prima facie the company. 56

Personal Relief Under S.994 for Corporate Wrongs: The Predicaments
Atlasview sets the precedent that personal relief for corporate wrongs is acceptable. This section identifies the difficulties that follow from the precedent in five ways. Firstly Fourthly, the article argues that where the shareholder opts for a personal remedy to recover his fraction of the reflective loss, 82 and there is no claim commenced by or on behalf of the company, the law fails to cure the loss endured by the company.
To entirely recover the loss caused by the corporate wrong then, each shareholder must bring similar personal claims for the same corporate wrong to recover their fraction of reflective loss. The article disagrees with Jonathan Crow's argument that 'requiring the shareholder to follow the derivative action route at the end of s.994 is cumbersome'. 83 The article asserts that subsequent petitions by individual shareholders to recover their fraction of reflective loss would lead to an inconvenient and inefficient multiplicity of litigation in relation to the one wrong, proving to be costlier than if the court required a derivative action to be commenced. 84 This outcome directly contradicts the aims of the Law Commission's 'Shareholder Remedies Reform Proposal' which sets out efficiency and cost-effectiveness as one of the six guiding principles in the consultation paper. 85 The problem of efficiency, however, may be resolved through case management and procedural rules promoting the consolidation of all shareholders as respondents to one 78  petition. 86 Nevertheless, in circumstances where shareholders lack the resources to bring a personal claim, justice for the corporate wrong will be denied altogether.
Lastly, the article raises the key concern that 'depending on the company's solvency', 87 the issue of creditor protection in the context of ordering personal relief for corporate wrongs is a serious concern. 88 Creditor protection in circumstances where the company is solvent is not problematic as the creditors will continue to get paid ordinarily. 89 If the company is insolvent, the creditors' interests will not be under threat from a petition, for the court simply would not make a purchase order where the essence of the allegations relate to breaches of directors' duties for that would clearly breach the order of distribution on insolvency. 90 The concern arises where the company is in the vicinity of insolvency as ordering personal relief will directly and adversely affect the creditors' ability to recover the sums due to them. 91 If the court adheres to proper practice, a derivative claim provides relief for the benefit of the company where its creditors have the foremost claim on its funds. In contrast, a purchase order ensures that the payment goes directly from the wrongdoer to the petitioner. 92 Applying the precedent created in Atlasview in circumstances where the company is in danger of insolvency, entirely undermines creditors' interests as 'the money due to the company bypasses its coffers and goes straight into the shareholders' pockets instead'. 93

Proposed Solution: An Authoritative Framework
Aiming to mitigate the predicaments in subsection 2, subsection 3 proposes an authoritative framework for the courts to apply in circumstances where a shareholder seeks personal relief for a corporate wrong.
Step one involves the court determining in the preliminary hearing stage whether the director's duty was owed to a) 'the company alone', b) 'the shareholder alone' or c) 'both the company and the shareholder'. Where the director owes a duty to the 'shareholder alone', the position is clear: a claim for personal relief will be well justified. Where the court ascertains that the 'director owes his duty to the company alone', it must abide by the proper plaintiff rule and require In effect, step one mitigates the third predicament discussed in subsection 2 regarding the rule in Foss and the Salomon principle because it firmly reasserts that the proper plaintiff in relation to a wrong done to the company is prima facie the company.
In sum, step one allows a shareholder to maintain a claim for personal relief in relation to a corporate wrong in two circumstances. First, where the director's duty is owed to 94  In both circumstances, the shareholder is exercising his personal right to a claim and not assuming the right of the company to bring a claim. Although the task of ascertaining to whom the duty is owed may seem to be fairly straightforward, in practice, it is a difficult task, especially since the breach of directors' duties may be construed as a wrong to the entity and the shareholder. 103 Notwithstanding the difficulty involved in categorising the cases owing to the factual overlap, the article submits that the courts must 'theoretically' distinguish between a breach of duty owed to the or 'net profits'. 118 However, quantifying losses in the sense of 'the potential the business had' is a vague task due to the uncertainties of the term 'potential'. Therefore, the article maintains the stance that a claim for 'diminution in value of the shares' resulting from 'a breach of directors' duties' is a classic example of a 'mere personal loss' and must be struck out as contrary to the 'no reflective loss' rule.
An example of a loss that is 'separate and distinct' from a company's loss was put forward by the court in the Prudential case. Where a director summons a meeting based on a fraudulent circular, shareholders can recover any loss personally suffered as a consequence, which may include the expenditure incurred to attend the meeting. 119 Additionally, the company may claim for the loss it endures because of the directors' fraudulent conspiracy. 120 Denying personal relief for 'mere personal loss' claims mitigates the first predicament regarding double recovery by the shareholder discussed in subsection 2 because the shareholder is barred from personally recovering the reflective loss. 121 In conclusion, those shareholders who cannot establish a 'separate and distinct' loss, would have to follow the derivative action route to obtain relief. 122 On the outset, it may appear that requiring a shareholder to commence a derivative action is cumbersome. On balance, however, requiring shareholders to follow a derivative claim in circumstances where they cannot establish a 'separate and distinct' loss will mitigate the fourth and fifth predicaments discussed in subsection 2. 123 In effect, a derivative claim will ensure the company is not denied redress for the wrong done to it and the creditors' interest in circumstances where the company is potential of insolvency will be safeguarded.

D. S.994 CORPORATE RELIEF FOR A CORPORATE CLAIM
The conventional paradigm relating to shareholder remedies holds that corporate wrongs must be prosecuted for judgment through the derivative claim route. 124 Contrary to the standard view, case law shows that where the alleged wrong is the breach of directors' duties owed to the company (a classic corporate wrong), s.994 has been used to secure a remedy for the company. 125 This consequence has triggered much academic debate. 126 Shareholders employ s.994 in two ways to seek corporate redress. Firstly, they do so to obtain corporate relief. 127 155 Therefore, in circumstances where the Parliament has reasserted the commitment to safeguard the rule in Foss, the courts' acceptance of using s.994 to order corporate relief which openly undermines the rule in Foss, is puzzling. 156 The second argument against ordering corporate relief under s.994 is that the courts risk rendering the derivative action obsolete, with s.994 destined to remain the 'remedy of choice among shareholders'. 157 Section E(2) below conducts a detailed evaluation of the need to safeguard the derivative jurisdiction. However, for the purpose of this section, the article submits that rendering the derivative action obsolete is a regressive step. The article appreciates the view of academics that the derivative action is a mechanism that reduces agency costs of a company. 158 The derivative actions assist in deterring directorial wrongdoing and help maintain investor confidence by providing an effective entry to the courts. 159 Finally, the article argues that ordering corporate relief under s.994 is an unwelcome development for companies because, notwithstanding their 'exceptional facts', 160 the outcomes of the cases discussed in subsection 1 can unlock floodgates to unwarranted litigation by minority shareholders and enhance the risk of abuse of process.
These shortcomings lead to the conclusion that the courts must abide by the orthodox derivative action approach to resolve corporate claims, rather than seeking equivalent relief through a more circuitous route. 161 However, the practical advantages that follow from allowing shareholders to obtain corporate relief on a petition negate this conclusion. To put it simply, ordering corporate relief following a successful petition, instead of requiring the shareholder to commence a derivative action, prevents the unnecessary duplication of proceedings. 162 Academics such as Cheung assert that ordering corporate relief directly under the petition is an eminently pragmatic and sensible conclusion that will expedite matters and prove to be cost-effective. 163 Thus, in subsection 3 the article aims to build in a proper mechanism for the court to follow when allowing a shareholder to indirectly enforce the company's rights under s.994. 164

The Middle-Ground Solution
The opening statement of this section is that the precedent in Cutland that allows the court to automatically order corporate relief upon establishing the criteria of the petition must be swept away. The article combines the findings from two cases to create a legal framework for the courts to follow in circumstances where a shareholder seeks to obtain 'corporate relief' under the 'petition' in respect of 'an infringement of the company's rights'. 165 The two cases significant to the legal framework are Charnley Davies 166 and

E. AUTHORISING A DERIVATIVE CLAIM VIA S.994
In section D the article distinguished between the two forms of corporate redress sought by shareholders as the outcome of the petition. 182 Section E aims to illustrate that the authorisation of a derivative claim as the outcome of a petition, is yet another undesirable consequence that stems from the overlap between the two remedial Companies Ordinance, 184 included an order authorising a derivative claim against its directors for their alleged breaches of duty. In subsection 1 the article raises a grave policy concern to assert that the existence of two parallel regimes for authorising derivative actions is problematic. In subsection 2 the article critically evaluates two proposals to resolve the problems identified in subsection 1. Finally, with the objective of mitigating the problematic consequences of the overlap in context, subsection 3 puts forward a reform proposal that establishes a middle-ground solution.

Authorising a Derivative Claim Through S.994: The Predicaments
As Thus, when authorising a derivative action as the outcome of a petition, the court focuses not on the question whether the continuance of a derivative claim will promote the interest of the company, but whether it provides a remedy that relieves the prejudiced shareholder. 188 Therefore, the two regimes have different threshold tests to obtain the authorisation of a derivative action. Thus, it is essential to safeguard both regimes that enable a shareholder to commence a derivative claim. However, it is also important to mitigate the policy concerns arising out of different threshold tests and safeguard the majority rule in Foss. Thus, in subsection 3 the article provides a middle-ground solution to the debate at hand.

Conclusions
The reform proposal requires the court to operate the s.994 regime in accordance with the laws governing the commencement and continuation of derivative claims under Pt 11 CA 2006. In implementing this proposal, step one involves, upon founding the elements of s.994, assessing if the director's unlawful conduct involves 'negligence, default, breach of duty or breach of trust by a director of the company'. 217 Step two requires the courts to deliberate over the position of the shareholders collectively prior to authorising a derivative claim under s.994. 218 Therefore, the second stage proclaims the court must evaluate factors such as 'authorisation or ratification', 219 the 'importance that a member acting in conformity with s.172 (duty to promote the success of the company) would attach to the claim', 220 and the 'views of the disinterested shareholders'. 221 In effect, the court is required to consider ss.263(2), 263 (3)