Can shareholders of a corporation sue for damages caused to themselves by the corporation in which they own shares?
Newfoundland and Labrador, Canada
The following excerpt is from Walsh v. TRA Company Limited, 2022 NLSC 6 (CanLII):
Foss v. Harbottle stands for the fundamental principle of corporate law that a corporation and its shareholders are different entities and only the corporation can sue for a wrong done to it. Shareholders have no cause of action for wrongs done to their corporation. Shareholders cannot sue for consequential losses to themselves resulting from damage inflicted on their corporation in which they own shares.
Orsborn J struck the entirety of this action in 2006. He concluded, when viewing the Statement of Claim contextual as a whole, it “is a corporate loss claim and is not maintainable by individual shareholders” (Walsh v. TRA Co. [2006] N.J. No. 389, 2006 CarswellNfld 376 (N.L.S.C.(T.D.)).
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