Shareholders' rights

Knowing your statutory rights as a shareholder is very useful.

Statutory rights are those that are enshrined by law (predominantly the Companies Act 2006). They cannot be reduced to the detriment of any shareholder.

However, they can be enhanced through use of a shareholders’ agreement or in the articles of association of the company. For example, the members can agree that resolutions approving short term loans to directors can be passed by members holding only 30% of the voting rights.

You may be writing a shareholders agreement and want to decide how to rebalance powers more favourably in one shareholder's interests.

Or may want to change the direction the business is going in, or prevent something happening.

You can use the list below to consider what rights shareholders have under law before any adjustment by the articles of association or a shareholder agreement, and therefore which individuals - alone or together - can influence company decision making.

Powers to block

We haven't included the powers that shareholders have to block decisions, since these are technically not rights. Logically, if members holding more than 75% of the voting rights can vote and pass a particular motion, members holding more than 25% of the voting rights can block the passing of a motion.

Requirement to arrange to vote

It is worth noting that rights only apply if the shareholder is present at the meeting, or is voting by proxy (allowing someone else to vote on his or her behalf). If a disinterested minority shareholder (for example, perhaps a corporate trustee of a family will trust) neither turns up nor arranges to vote in any way, those possible votes are taken out of the calculation.

The following are the statutory rights of shareholders who together hold more than a certain proportion of the shares that hold voting rights and who are present personally or by proxy at the meeting.

Rights of all shareholders, regardless of percentage of shares held

Information rights

  • to inspect the register of members and the index of members' names without charge

  • to be given a copy of the register of shareholders within 10 days of a request (possibly subject to a charge)

  • to inspect the register of directors’ service contracts without charge

  • to receive a copy of the annual accounts

  • to inspect the minutes of any general meeting

Meetings

  • to ask the court to call a general meeting

  • to receive notice of general meetings

  • to vote at a meeting of members

Other

  • not to be unfairly prejudiced

  • to be given a share certificate

  • to have the shareholder’s name entered on the Register of Members

  • to have the company wound up, provided that it is just and equitable to do so

Rights of shareholders holding more than 5% of shares

Meetings

  • to call a general meeting

  • to refuse to consent to a meeting being held at short notice

Other

  • to circulate a written statement on any matter to the other members

Rights of shareholders holding more than 10% of shares

  • to have the Company's Annual Accounts audited

Rights of shareholders holding more than 50% of shares

  • to pass an ordinary resolution

Ordinary resolutions

An ordinary resolution is any that can be passed by a simple majority of the shareholders (more than half of the votes cast by the shareholders entitled to vote and present personally or by proxy at the meeting).

Where the Companies Act 2006 or the company’s articles of association do not specify whether a resolution required is an ordinary one or not, agreement by a simple majority satisfies the requirement of Act for a resolution or a decision in a general meeting of members.

Examples of decisions that are usually made by ordinary resolution include:

  • increasing (but not reducing) the authorised share capital

  • providing or renewing the directors' authority to allot relevant securities

  • approving transactions between the company and "connected" persons

  • removing of a director (providing special notice of the resolution has been given)

Ordinary resolutions with special notice

Certain ordinary resolutions require that special notice of the intention to propose one must be given to the company in advance of a meeting.

Resolutions requiring special notice include those proposing:

  • the removal of a director

  • the appointment of an auditor other than a retiring auditor

  • the removal of an auditor before the expiration of his or her term of office

Rights of shareholders holding more than 75% of shares

  • to pass a special resolution

Special resolutions

A special resolution is one passed by at least 75% of the shareholders present in person or by proxy and entitled to vote at a general meeting.

Notice of not less than 21 days’ notice must be given to the members, specifying the intention to propose the resolution as a special resolution.

It follows that shareholders holding more than 25% of the shares may block the others from passing a special resolution.

The following are examples of matters for which a special resolution is required by the Companies Act 2006.

  • amendment of the articles of association

  • changing the company’s name

  • changing the country of registration of the company from Wales to England and Wales

  • reduction of the share capital of the company, for example, in connection with the re-domination of shares

  • disapplication of pre-emption rights by the directors of the company where there is only one class of shares; where the directors act in general authority; or by the directors to a specified allotment of equity securities or application with modification of an allotment

  • re-registration of a company as a new type, for example, an unlimited company as a private limited company or a private limited company as a public limited company

  • authorising certain off-market purchases by the company of its own shares, and varying, revoking and renewing that authority

  • varying class rights

  • using capital to pay for the redemption and purchase of the company’s own shares

  • winding up the company, whether voluntarily, or by a court

These rights cannot be reduced or changed by any agreement between the shareholders.

Registers to be maintained at a company's registered office

Certain registers of information are required to be held at the company’s registered office, so that they can be inspected by the shareholders or by stakeholders as required.

Nowadays, all of this information is available online via the Companies House website.

The registers required to be held are:

  • Register of directors and secretaries

  • Register of members

  • Register of directors' interests in shares

  • Register of charges, together with copies of all instruments containing registration with the Registrar

  • Minute books

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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