Smith v Croft [1988] Ch 114 is a UK company law case concerning derivative claims. Its principle that in allowing a derivative claim to continue the court will have regard to the majority of the minority's views has been codified in CA 2006 section 263(4).

Facts

Minority shareholders claimed to recover money paid away contrary to the financial assistance prohibition (now CA 2006 section 678) and being ultra vires. They had 14% of the company's shares, the defendants held 63%, and other shareholder, who did not want litigation, held 21%.

Judgment

Knox J held that if the claimants were a minority even after the wrongdoers were taking out of the equation, then there is no right to sue, even with a Foss v Harbottle

Foss v Harbottle

Foss v Harbottle 67 ER 189 is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the rule in Foss v Harbottle", and the several important exceptions that have been...

exception. Independence is a question of fact. He followed Burland v Earle in Lord Davey’s dicta that shareholders cannot have a bigger right to sue than the company with its procedural and substantive limitations.