Bromley Solicitors

Bromley Shareholder’s Rights FAQs

What are the basic rights of shareholders under company law?

Every shareholder has three basic rights, including the right to inspect company registers on business days between 9am and 5pm and be provided the means to make copies; inspect a copy of the memorandum and the company’s articles of association and receive the company’s annual accounts and reports.  Beyond that, the company’s articles of association and any shareholders agreements in place may give shareholders additional rights, including the right to attend shareholder’s meetings, vote at general meeting (if voting shares are held) and receive a dividend (subject to one being declared).

Can different shareholders have different powers?

If we ignore the fact that the proportion of shares one holds may influences shareholder power, the company’s articles of association may allow for voting and non-voting shares to be issued, and this option may be used where the company wants to attract investment but does not want to lose control over the company.  However, if you hold non-voting shares, you can expect to have the same basic powers as other voting shareholders, as is the case between voting shareholders.

I am a minority shareholder and feel I am being unfairly treated.  What does the law say on this matter?

The directors are under a legal duty to deal with all shareholders fairly, which includes minority shareholders.  However, in practice majority shareholders will influence the board to a large extent and this can result in unfair prejudicial treatment in favour of the majority.  You can apply to the courts to put a stop to this kind of behaviour, although it can be difficult to prove you are being unfairly prejudiced.

How does the proportion of shares held affect the powers one has?

Simply stated, beyond all the basic rights that are held by all shareholders in common, the extent of a shareholders increase with the proportion held.   You should also bear in mind that these powers can be held by individual or by groups or shareholders.

ñ  If you or a group of shareholders hold 5% of shares or more, you have the power to call a general meeting and can make an application to Department for Business, Innovation and Skills to have the company investigated.

ñ  If you or a group of shareholders have a majority shareholding, 50% or more, you will be able to appoint or dismiss directors and pass ordinary resolutions at general meetings.

ñ  If you or a group of shareholders have a 75% shareholding or greater, you can pass general and special resolutions at general meetings.

What is a special resolution?
If a shareholder has a 75% shareholding or greater, he will be entitled to pass a special resolution which can allow for changes to the company’s articles of association to be made  subject to any statutory company law requirements.  In the event that the company needs to be wound up due to insolvency, a special resolution will be needed.

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