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Read moreKey shareholder rights and restrictions at all levels of shareholding in private companies
AuthorsPaul Lunt
7 min read
As a shareholder, the more aware that you are of your rights, the easier it is to protect your commercial interests.
Your rights as a shareholder depend on how many shares you own. If you hold over 50% of a company’s issued shares, you’re likely to have a controlling interest that allows you to shape its direction.
However, no matter how many shares you have, there are certain rights that you can exercise as a shareholder. It’s wise to familiarise yourself with the different rights and restrictions to safeguard your interests.
Here, Partner and Head of Litigation Paul Lunt provides a list of the key rights and restrictions that apply at all levels of shareholding in private companies.
100% shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
| Can do anything. | No. | Section 1159(2), CA 2006 and Schedule 6, CA 2006 |
90% shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
Not less than 90% (or such higher percentage, not exceeding 95%, as may be specified by the company's Articles). Hold a general meeting on short notice (i.e., less notice to the members than would normally be required). | CA 2006, S. 307(4), (5), (6) & (7) |
75% shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
Pass a Special Resolution. A Special Resolution is a resolution passed by a majority of not less than 75% of the members present in person or by proxy and entitled to vote at a general meeting. Not less than 21 days’ notice, specifying the intention to propose the resolution as a special resolution, must be given to the members. | Petitioning on the grounds of unfair prejudice (CA 2006 S. 994) i.e., the court has a power to set aside resolutions of members if the members with the majority of the voting power have used their votes for a corrupt or improper purpose. (See Clemens v Clemens) | CA 2006 S.283(1) |
The following are examples of matters for which a Special Resolution is required by CA 2006:
| (a) alteration of articles. | — | CA 2006 S. 21(1) |
| (b) change of name. | — | CA 2006 S. 77(1) |
| (c) reduction of share capital. | — | CA 641 (1) |
| (d) increase in share capital. | — | CA 2006 S. 617-619 |
| (e) authority for allotment of equity securities by the directors without restriction or subject to modified restrictions. | — | CA 2006 S. 571 |
(f) re-registration of: - an unlimited company as a limited company - a private company or an unlimited company as a public company - a public company as a | — | CA 2006 S. 105 (1) CA 2006 S. 94 & S. 90 CA 2006 S. 97 |
| (g) resolution of a company for winding up by the court or for voluntary winding up. | — | IA 1986 S. 122(1)(a) IA 1986 S. 84 (1)(b) |
50+ % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
Pass an Ordinary Resolution. If the Companies Act requires ‘a resolution’ and does not specify what type of resolution, this means an ordinary resolution which requires a simple majority (i.e., 50.01%) unless the articles require a higher majority or unanimity. | — | CA 2006 S. 282 |
Decisions that may be made by Ordinary Resolution include:
| (a) any item of routine business where CA 2006 requires approval of the matter by members in general meeting | — | |
| (b) exercising authority to alter (but not reduce) the authorised share capital | — | CA 2006 S. 617 & S. 618(3) |
| (c) provide or renew the directors' authority to allot relevant securities | — | CA 2006 S. 551(8) |
| (d) payment of a final dividend | — | Para 30 Schedule 1 companies Model Articles |
| (e) capitalisation of profits | — | Article 36 Model Articles |
| (f) approval of transactions between the company and ‘connected’ persons | — | CA 2006 S. 190 |
| (g) approval of certain off- market purchasers by a company of its own shares. | — | CA 2006 S694 |
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
Ordinary Resolution With Special Notice. Special notice of the intention to propose certain ordinary resolutions must be given to the company. | — |
These resolutions requiring special notice include those proposing:
| Requires special notice to be given or the appointment of somebody instead of the director so removed, at the meeting at which he is removed. | CA 2006, S. 168(2) |
| 2. The appointment as auditor of a person other than the retiring auditor. | — | CA 2006, S. 485-488 |
| 3. The removal of an auditor before the expiration of his term of office. | — | CA 2006, S. 510(2) & S. 511 |
25+ % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
| Block Special Resolution. | — | CA 2006, S. 283 |
15+ % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
| Right to object to variation of class rights (right to apply to court to cancel variation). | — | Section 633 CA 2006 |
10+ % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
The right to have a company’s annual accounts audited.
| — | CA 2006, S. 476 |
5+ % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
| The right to require the circulation of a proposed written resolution and with it a statement. | Any request must be given to the company in writing at least one week before the General meeting to which the resolution relates. | CA 2006, S. 292 — can be less than 5% shareholding required, if stipulated in the articles. |
The right to circulate a statement with respect to:
| Any request must be given to the company in writing at least one week before the general meeting to which the statement relates. | CA 2006 S.314 — can be less than 5% shareholding required, if stipulated in the articles. |
| The right to call a general meeting. | Any request must be valid, given to the company in writing or in electronic format and must be given at least one week before the general meeting to which the request relates. | CA 2006 S. 303 |
| The right to prevent the deemed re-appointment of auditor. | Any notice must be given to the company in hard copy or electronic form, authenticated by the persons giving it and received before the end of the accounting reference period immediately preceding the time the deemed re-appointment would have taken place. | CA 2006 S. 488 — can be less than 5% shareholding required, if stipulated in the articles. |
Any % shareholding — list of rights
| Shareholder rights | Any restrictions | Statutory position (Companies Act 2006) |
| The right to ask the court to call a general meeting. | — | CA 2006, S. 306(2)(b) |
| The right not to be unfairly prejudiced. | — | CA 2006, S. 994(1) |
| The right to have the company wound up provided that it is just and equitable to do so. | — | IA 1986 S. 122 (1)(g) |
| The right to vote on resolutions. | — | CA 2006, S. 284 |
| The right to a share certificate. | This right depends on the articles of the company. | CA 2006, S. 769 |
| A members’ right to have their name entered on the Register of Members. | — | CA 2006, S. 113 |
| The right to copies of the company’s accounts and reports. | — | CA 2006, S. 431 & S. 432 |
| The right to an AGM. | Only if an obligation to call AGMs appears in articles. | |
| The right to inspect minutes of general meetings. | — | CA 2006, S. 248, 355 & 358 |
The right to inspect the register of members and index of members' names without charge. | Subject to the company’s right to go to court to refuse access. | CA 2006, S. 116(1)(a) and S. 117 |
| The right to require a copy of the register of shareholders within ten days of the request subject to a charge. | — | CA 2006, S. 116(2) |
| The right to inspect the register of director’s service contracts without charge. | — | CA 2006, S. 229(1) |
| Registers to be maintained at a company's registered office. | — | CA 2006 S. 114 |
| Register of directors and secretaries. | — | CA 2006, S. 162 & S. 275 to record the information required by CA 2006, S. 163 & 277. |
| Register of members. | — | CA 2006, S. 113 |
| Register of directors' interests in shares. | — | CA 2006, S. 808 |
| Minute books. | — | CA 2006, S. 248 |
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