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Shareholder Rights Background In practice, the strict rights and entitlements that come with the ownership of shares in a Limited Company are seldom fully exploited or utilised by shareholders. This is largely because shareholders are generally unaware of the rights that they have simply by virtue of being a shareholder. Similarly, most Company Directors would be alarmed at the strict obligations that they have as regards the Company’s shareholders, which include maintaining a Register of Directors/Secretaries, a Register of Shareholders, a Register of Director’s Interest in Shares, a Register of Charges and Minute Books. These must be kept open to inspection by shareholders.
More shares, more power It may seem an obvious statement but the greater the shareholding of an individual, the greater are his/her rights and the greater is his/her power within the Company. This is so not only because the larger the shareholding the more likely it is to represent a controlling interest, but also because the Companies Act affords greater rights and power to an individual as the size of his/her shareholding increases. For example, a shareholder owning 5% of a company has the right to have an item placed on the Agenda for discussion at the Annual General Meeting and, once the shareholder’s ownership reaches 10% of the company, he/she has the right to actually call a General Meeting of shareholders.
Controlling Interest In the great majority of Limited Companies, a shareholding in excess of 50% of the issued share capital will be enough to control the company, dictate the makeup of the Board of Directors and to be able to do most of the acts necessary to run the company in its everyday business. It is possible for those owning less than 50% of a company to protect themselves from being at the mercy of those holding over 50% of the shares in the company and this is one reason why shareholders should give serious consideration to agreeing a shareholders agreement or adopting professionally drafted Articles of Association.
The Complete List of Rights The following table sets out a complete list of the rights of shareholders and the relevant statutory provisions for each right.
©
BrabnersChaffeStreet 2003.
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