United Kingdom company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...

, reflective loss is the loss of individual

shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal o ...

s that is inseparable from general loss of the

company A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared ...

. The rule against recovery of reflective loss states that there should be no double recovery, so a shareholder can only bring a

derivative action A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are ...

for losses of the company, and may not allege suffering a loss in a personal capacity for a personal right. Reflective loss extends beyond the diminution of the value of the shares; it extends to the loss of

dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...

s (specifically mentioned in ''

Prudential Assurance v Newman Industries Ltd Prudential may refer to: Companies * Prudential plc, a British multinational insurance company ** Prudential BSN Takaful, a Malaysian takaful company ** ICICI Prudential Life Insurance, an Indian company * Prudential Financial, an American financ ...

'') and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds. All transactions or putative transactions between the company and its shareholders must be disregarded. In the Supreme Court of the United Kingdom restricted (but declined to abolish) the doctrine, but disapproved many of the statements made previously in ''Johnson v Gore Wood & Co'', describing Lord Millet's speech in particular as a "wrong turn". Commentators have indicated of the decision is ''Sevilleja'': "The importance of the decision cannot be overstated."

Legal development

*''

982 Year 982 ( CMLXXXII) was a common year starting on Sunday (link will display the full calendar) of the Julian calendar. Events By place Europe * Summer – Emperor Otto II (the Red) assembles an imperial expeditionary force at Tar ...

Ch 204 *''

Johnson v Gore Wood & Co is a leading UK company law decision of the House of Lords concerning (1) abuse of process relating to litigating issues which have already been determined in prior litigation or by way of settlement, (2) estoppel by convention, and (3) reflect ...

'' 0022 AC 1 *''

Giles v Rhind Giles may refer to: People * Giles (given name), male given name (Latin: ''Aegidius'') * Giles (surname), family name * Saint Giles (650–710), 7th–8th-century Christian hermit saint * Giles of Assisi, Aegidius of Assisi, 13th-century compa ...

'' 002EWCA Civ 1428 *''

Gardner v Parker Gardner may refer to: Name *Gardner (given name) *Gardner (surname) Places United States *Gardner, Colorado *Gardner, Illinois * Gardner, Kansas *Gardner, Massachusetts *Gardner, North Dakota * Gardner, Tennessee *Gardner, Wisconsin *Glen Gardne ...

'' 0042 BCLC 554 *''

Sevilleja v Marex Financial Ltd is a judicial decision of the Supreme Court of the United Kingdom relating to company law and the rule against reflective loss. The issue which the court had to resolve was whether the creditors of a company could claim against a third party w ...

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Notes

United Kingdom company law {{UK-law-stub

Legal development

See also

Notes