THE CORPORATIONS LAW

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)  [Seeking leave to proceed or intervene]  

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)  [Court's obligation]  

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)  [Presumption]  

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)  [Interpretation]  

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:

Related party is defined in section 228.