Derivative action and corporate malfeasance in Uganda

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Date
2017
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Publisher
Panamaline Books Distributors Limited
Abstract
A Company is an independent legal entity where members invest their resources in order to benefit from the profit deriving from. In the same vein, the management of a company assume managerial powers as contained in the articles of association of the company. The separation of ownership from control creates a serious agency question, that the possibly of conflict of interest which manifests in a plethora of ways including misappropriation of company funds. This mostly affect the minority shareholders who do not have powers to change the decisions or to challenge the actions of the directors of the company. Derivative action is a mechanism whereby the minority views can be heard and action can be taken on how the activities of the directors can be reviewed in situations of corporate malfeasance. This article explains a derivative action where a minority shareholder can assume power to challenge the directors of the company. In this article the writer examines the wrongdoing of the management in a company as well as examines the duties of a director in a company. Causes of corporate malfeasance are also highlighted and instance where it is appropriate for a derivative action supposed to have been taken by a member on behalf of the company. Doctrinal method was used in this article whereby text books, case law and the Ugandan companies Act was consulted.
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Keywords
derivative, corporate governance, malefeasance, Uganda, company law
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