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Shareholder Takeaways From NY Internal Affairs Doctrine Suit By Douglas Hirsch and James Ancone (June 24, 2025, 5:25 PM EDT) In an important ruling for shareholders, directors and officers of foreign corporations, the Court of Appeals of the State of New York in Ezrasons Inc. v. Rudd held on May 20 that the beneficial owner of shares of Barclays PLC — a bank holding company incorporated under the laws of England and Wales — lacked standing to file derivative claims against Barclays directors and officers in New York court. In reaching that conclusion, the court — in a 6-1 decision — applied what the opinion called New York's "firmly entrenched" internal affairs doctrine and rejected the plaintiff's argument that, even though it had no standing to sue derivatively under English law, New York's Business Corporation Law granted it the right to file derivative claims in New York court against Barclays directors and officers.[1]
Douglas Hirsch
The internal affairs doctrine is a "choice-of-law rule providing that, with rare exception, the substantive law of the place of incorporation governs disputes relating to the rights and relationships of corporate shareholders and managers," according to the decision.[2] The court's decision is a win for all corporate stakeholders seeking stability and predictability in resolving disputes between a corporation's shareholders and its directors and officers.
James Ancone
The Ezrasons Decision The lawsuit was filed in the Commercial Division of the Supreme Court of the State of New York, County of New York, by Ezrasons Inc. The complaint asserted derivative claims against current and former Barclays directors and officers, alleging that they breached fiduciary duties owed to Barclays under English law and that those breaches damaged the company. Significantly, the plaintiff admitted that it was a beneficial owner — not a registered owner — of Barclays shares. Based on this, the defendants moved to dismiss the complaint for lack of standing, arguing that under New York's internal affairs doctrine and substantive English law, the right to maintain a derivative claim on behalf of an English corporation is limited to registered members of the corporation whose names are recorded on the company's official register of members.