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Aug 8, 2023

Wheelers Words – Overview of Shareholder Rights

Recently I have been dealing with several transfers of shares between family members and thought it would be useful, to set out below, a reminder about the key rights that shareholders have in a private limited company, that is incorporated in England and Wales, under the Companies Act 2006.

It is worth noting that this is not an exhaustive list and are based on the default percentage thresholds in the Companies Act 2006.  Some of these percentages can be altered, for example, by the Company’s Articles of Association or a shareholder’s agreement.

Shareholder has full control over the company.

Can consent to hold a general meeting at short notice.

Able to pass a Special Resolution, but at least 21 days’ notice must be given to members stating that the intention is to propose the resolution as a special resolution.

Some examples of items for which Special Resolutions are required are alteration of articles, changing the company name, increasing or reducing share capital, re-registering a private company as a public company and vice versa and resolving that the company be wound up either by the court or voluntarily.

50% or more
Able to pass an Ordinary Resolution which requires a simple majority, examples of which are any routine business requiring members approval in general meetings, exercising authority to alter (but not to reduce) the authorised share capital, pay final dividends, capitalise reserves, and approve transactions between the company and connected persons.

Able to pass an Ordinary Resolution with Special Notice, for example to remove a director, remove an auditor before the end of their term of office and appoint an auditor other than the retiring auditor.

25% or more
Able to prevent shareholder resolutions being passed as Special Resolutions.

10% or more
Have the right to require a company’s annual accounts (that would otherwise be exempt) to be audited.

5% or more
The right to call a general meeting, to circulate a proposed written resolution and accompanying statement, to circulate statements regarding a proposed resolution to be dealt with at that meeting and circulate statements regarding any other business to be dealt with at the meeting. These rights have restrictions such that the requests must be given to the company in writing at least a week before the meeting to which they relate and, in the case of calling a general meeting, be valid (for instance not frivolous or defamatory, or be ineffective i.e., against the current articles).

Any %
Examples are, the right to a dividend if declared (Directors can declare a dividend but members cannot vote to pay more than directors have recommended), the right to reports and accounts, right to receive notice of, attend and vote at an AGM if the articles allow and various inspection rights of company registers, but which are sometimes subject to charges or the company’s right to refuse access with the courts permission.

If you require any further information, please get in touch with your usual Wheelers contact, who will be pleased to help.

Article written by Jonathan Salmon