## Facts

- Minority shareholders sought court permission to bring a derivative action on behalf of the company against its directors, alleging wrongdoing.
- The company was managed by the directors accused of wrongdoing, and it had not itself pursued any claim.
- The application centered on whether the shareholders met the statutory requirements for such claims under Part 11 of the Companies Act 2006.
- The court considered the nature and sufficiency of evidence required to satisfy statutory thresholds, and how courts should assess both mandatory and discretionary factors in this context.

## Issues

1. What must minority shareholders demonstrate to establish a "basic case" for permission to bring a derivative claim under section 263(2) of the Companies Act 2006?
2. Under what circumstances is the court required to refuse permission for a derivative claim according to section 263(3) of the Companies Act 2006?
3. How should courts evaluate discretionary factors under section 263(4) when determining whether to grant permission for a derivative action?

## Decision

- The court clarified the evidentiary standard required to meet the "basic case" threshold under section 263(2), emphasizing that claimants must present sufficient evidence suggesting a reasonable company would pursue the claim.
- It held that section 263(3) sets out absolute grounds for refusing permission; if any of these grounds are met, the court must deny the derivative claim, even if a basic case exists.
- The court outlined how to assess whether a hypothetical director acting under section 172 would regard the claim as contrary to the company's best interests, and whether the relevant act had already been ratified.
- When none of the mandatory bars applied, the court detailed the discretionary considerations under section 263(4), such as the claimant’s good faith, the hypothetical director’s approach, reasons for the company’s inaction, and potential for future ratification.
- The decision provided structured guidance on balancing and applying these statutory requirements in derivative actions.

## Legal Principles

- To obtain permission for a derivative claim, a shareholder must show a prima facie case that a valid claim exists and that a reasonable company would pursue it (s 263(2)).
- Permission must be refused if a hypothetical director, acting in accordance with section 172, would not pursue the claim, or if the company has ratified the alleged wrongdoing (s 263(3)).
- Courts may consider additional factors such as claimant’s good faith, seriousness of the claim, company’s reasons for inaction, and possibility of subsequent ratification (s 263(4)).
- The judgment clarifies the relationship and analytical structure for applying mandatory and discretionary statutory criteria in derivative actions.

## Conclusion

Iesini v Westrip Holdings Ltd [2011] 1 BCLC 498 is a leading authority on derivative claims under the Companies Act 2006, setting out the requirements for permission to proceed, the operation of mandatory bars, and the court’s approach to discretionary factors, guiding both litigation practice and subsequent case law.
