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THE RULE AGAINST REFLECTIVE LOSS IN SHAREHOLDER DISPUTES - COMPANY LAW

By: CONSTANTINOS CLERIDES Dec. 12, 2022

The rule is that a shareholder, assuming it otherwise has a cause of action as well as the company, cannot recover for loss which is merely reflective of the company’s loss.


In the leading case of Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch. 204 CA (Civ Div), it was stated that a diminution in the value of a shareholding or in distributions to shareholders, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, is not in the eyes of the law damage which is separate and distinct from the damage suffered by the company, and is therefore not recoverable. Therefore a shareholder must review other options such as derivative actions or procedures relating to the protection of minority shareholders.


For more information regarding shareholder and commercial disputes contact Phoebus, Christos Clerides & Associates LLC at info@clerideslegal.com or con.clerides@clerideslegal.com