Reflective loss

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In United Kingdom company law, reflective loss is the loss of individual shareholders that is inseparable from general loss of the company. The rule against recovery of reflective loss states that there should be no double recovery, so a shareholder can only bring a derivative action for losses of the company, and may not allege suffering a loss in a personal capacity for a personal right.[1]

Reflective loss extends beyond the diminution of the value of the shares; it extends to the loss of dividends (specifically mentioned in Prudential Assurance v Newman Industries Ltd) 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.

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  1. ^ "The vanishing exception". New Law Journal. 28 November 2008. Reflective loss is the name given to the loss suffered by a shareholder where there is both breach of a duty owed to the company, and breach of a duty owed to the shareholder, but the shareholder’s loss would be made good if the company enforced its rights against the wrongdoer in respect of its loss.