What is the test for a shareholder to sue a corporation for personal losses?
Alberta, Canada
The following excerpt is from Edwards v. Fisher, 2007 ABQB 666 (CanLII):
While this result can appear harsh, the courts have repeatedly pointed out the policy reasons behind the adoption and application of the rule in Foss v. Harbottle in Canada. A corporation has a separate legal existence from that of its shareholders. A shareholder cannot be sued for the liabilities of the corporation and with that benefit there comes a corresponding burden: a shareholder cannot sue for the losses suffered by the corporation. Without this rule multiple lawsuits could ensue and double recovery could occur. If a corporation will not pursue its losses and thereby protect the individuals behind the corporation, they can, in appropriate circumstances, and subject to the court’s approval, commence an action on behalf of the corporation or its shareholders. For these reasons the courts have found that personal actions, such as this one, must meet a stringent test.
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