Derivative Actions & Breach of Directors’ Duties
Breach of Directors’ Duties and Shareholder Remedies
Derivative actions can allow shareholders to act on behalf of a company where directors have breached their duties or acted against the company’s interests.
The general rule in Irish company law is that a wrong done to a company is a matter for the company itself to pursue, rather than individual shareholders. However, that rule has important exceptions. Directors owe statutory and fiduciary duties under the Companies Act 2014, and those duties can be enforced when the relevant legal requirements are met.
Our team advises both shareholders seeking to hold directors to account and directors defending allegations of breach of duty.
When Can a Shareholder Bring a Derivative Action?
Because company property and company claims generally belong to the company, a shareholder generally cannot sue in their own name for a wrong done to the company. Irish law recognises exceptions to this rule, commonly referred to as a derivative action, allowing a shareholder to bring proceedings on the company’s behalf, typically where:
- The wrongdoers are themselves in control of the company and would otherwise block the company from suing
- The conduct amounts to fraud on the minority
- The act complained of is ultra vires (beyond the company’s powers) or illegal
- The act requires a special majority that was not obtained
- A shareholder’s individual (personal) rights, as distinct from the company’s rights, have been infringed
Derivative actions are procedurally complex and courts scrutinise them carefully before allowing a case to proceed, so early, careful advice is essential.
How We Help with Derivative Actions
- Advising shareholders on whether a derivative action is available, or whether a section 212 oppression petition or personal claim is a better route
- Preparing and pursuing derivative claims against directors for breach of fiduciary duty, misappropriation of company assets, or diversion of business opportunities
- Advising directors on their duties under section 228 and defending allegations of breach
- Advising on related remedies including account of profits, restitution, and injunctions to prevent continuing harm to the company
- Working with our Insolvency & Restructuring team where a company’s financial position is also affected
Need Advice About a Derivative Action?
If you believe a director has breached their duties or acted against the interests of a company, our solicitors can advise you on whether a derivative action or another shareholder remedy may be available.
We advise shareholders, directors and companies on derivative actions, breach of directors’ duties and related shareholder disputes.
Derivative Actions and Directors’ Duties: Frequently Asked Questions
It’s a claim brought by a shareholder, on behalf of the company, against a wrongdoer (typically a director) for a wrong done to the company — used where the company itself, due to the wrongdoers’ control of it, will not bring the claim itself.
A derivative action recovers losses for the company itself (for example, damages paid back into the company). A section 212 petition is a personal claim by a shareholder for relief from oppressive or unfairly prejudicial conduct, and more commonly results in a personal remedy such as a share buy-out. The two can overlap, and we advise on which — or both — best fits your situation.
Yes. Directors who breach their statutory or fiduciary duties can be personally liable to account for profits made, to compensate the company for losses caused, and in serious cases can face disqualification or restriction under company law.
Typically company records, board minutes, financial statements, correspondence, and any evidence of the director’s conflicting interest or improper conduct. We can advise early on your right to inspect company books and records to build this evidence.
Yes — a derivative action is available to shareholders regardless of the size of their shareholding, provided the legal requirements for one of the recognised exceptions are met.
