As the owners of a private limited company, shareholders have certain rights.
Shareholder rights are derived from the Companies Act 2006, the articles of association and any shareholders’ agreement. While all shareholders have some basic rights, others are applicable only to shareholders who own a certain percentage of the shares in the company.
In this article we will consider the main statutory rights of shareholders, however these may be varied by the company’s articles of association or a shareholder’s agreement if one exists.
Some of the rights apply if the shareholder holds a certain percentage of the voting shares in the company, others apply if the shareholder holds a certain percentage of the shares in the capital of the company. This distinction is only relevant if there is more than one class of share and at least one of those classes does not carry voting rights. If your company has only one class of share, then there is no distinction and your shareholding will relate to both the voting rights and the shares in the capital of the company.
All references to legislation in the following are references to the Companies Act 2006.
Rights of all shareholders
All shareholders have the right to:
- Inspect the register of members free of charge (however there may be a fee for producing copies), provided that it is for a “proper purpose”* (s.116);
- Inspect records of resolutions and minutes free of charge (however there may be a fee for producing copies) (s.358);
- Inspect directors’ service contracts (however there may be a fee for producing copies) (s.229);
- Bring a claim against a director (s.260);
- Attend general meetings (s.310);
- Vote at general meetings (subject to the rights attached to the class of shares held) (s.284);
- Demand a poll vote (however this right can be restricted by the company’s articles) (s.321);
- Appoint a proxy to attend and vote at general meetings on their behalf (s.324); and
- Receive a copy of the company’s annual accounts (s.423).
*There has been some helpful case law on what constitutes a “proper purpose”. If you are a shareholder in a company which is refusing access to the company records, of if you are a company and you believe that a shareholder is seeking information for an improper purpose, we suggest that you get in touch and one of our specialist advisors may be able to assist.
Rights of shareholders holding different percentages of company voting shares and issued share capital
At least 5% of the voting shares in the company
These shareholders have the right to:
- Require a written resolution to be circulated (in the absence of a board decision to do so) (s.292);
- Require a general meeting to be called (in the absence of a board decision to do so) (s.303); and
- Require the circulation of a statement of no more than 1,000 words relating to a proposed resolution or other business to be considered at a general meeting (s.314).
At least 10% of the voting shares in the company
These shareholders have the right to:
- Demand a poll vote (this right cannot be restricted by the company’s articles) (s.321)
At least 10% of the issued share capital in the company
These shareholders have the right to:
- Require an audit (where the company would otherwise be exempt) (s.476)
Rights of shareholders holding more than 10% of the voting shares
These shareholders have the right to:
- Block a short notice meeting and require the full notice period to run before the meeting is held (21 days for an AGM or 14 days for a general meeting) (s.307)
Rights of shareholders holding more than 10% of the issued share capital
These shareholders have the right to:
- Block a squeeze out – shareholders holding 10% or less of the shares in the capital of the company can be forced to sell their shares on a takeover. Holding more than 10% gives the shareholder the right not to be bought out, subject to contrary provisions in the articles of association (Re Euro Accessories Ltd [2021] EWHC 47 (Ch)) (s.979)
Rights of shareholders holding at least 15% of the issued shares of the relevant class
These shareholders have the right to:
- Cancel the variation of the rights attached to that class of share (s.633)
Rights if you hold more than 25% of the voting shares in the company
These shareholders have the right to:
- Block a special resolution – such as to change a company’s articles (s.283); and
- Block a scheme of arrangement (typically used to restructure a company’s finances, often due to impending insolvency) (s.899).
Rights if you hold at least 50% of the voting shares in the company
These shareholders have the right to:
- Block an ordinary resolution (s.282)
Rights if you hold more than 50% of the voting shares in the company
These shareholders have the right to:
- Pass an ordinary resolution (s.282)
Rights of shareholders holding at least 75% of the voting shares in the company
These shareholders have the right to:
- Pass a special resolution (s.283); and
- Approve a scheme of arrangement (s.899).
Rights of shareholders holding at least 90% of the voting shares in the company
These shareholders have the right to:
- Force a general meeting at short notice (s.307)
Rights if you hold at least 90% of the issued share capital in the company
These shareholders have the right to:
- Squeeze out minority shareholders on a takeover (s.979)
How we can help
If you are unsure of your legal rights in any part of your business management, or if you believe that your rights have been breached, our expert commercial dispute resolution lawyers may be able to help. Please do get in touch if you require any assistance.
This article is for general information purposes only and should not be used as a substitute for legal advice. For more information on shareholder rights, please see our previous articles: