Corporations Act 2001

CHAPTER 2F - MEMBERS' RIGHTS AND REMEDIES  

PART 2F.1A - PROCEEDINGS ON BEHALF OF A COMPANY BY MEMBERS AND OTHERS  

SECTION 237   APPLYING FOR AND GRANTING LEAVE  

237(1)    
A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

237(2)    
The Court must grant the application if it is satisfied that:

(a)    it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b)    the applicant is acting in good faith; and

(c)    it is in the best interests of the company that the applicant be granted leave; and

(d)    if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and

(e)    either:

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.

237(3)    
A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(a)    the proceedings are:

(i) by the company against a third party; or

(ii) by a third party against the company; and

(b)    the company has decided:

(i) not to bring the proceedings; or

(ii) not to defend the proceedings; or

(iii) to discontinue, settle or compromise the proceedings; and

(c)    all of the directors who participated in that decision:

(i) acted in good faith for a proper purpose; and

(ii) did not have a material personal interest in the decision; and

(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests of the company.

The director ' s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

237(4)    
For the purposes of subsection (3) :

(a)    a person is a third party if:

(i) the company is a public company and the person is not a related party of the company; or

(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b)    proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

Note 1: Related party is defined in section 228 .

Note 2: For who is a third party of a CCIV, see section 1227H .