Many private companies, during operations, can become mired in shareholder disputes. These disputes can arise between various parties within a business, including shareholders and company directors.  

When people engage in business together, they anticipate that the venture will be a successful and harmonious one. Unfortunately, this isn’t always the case and issues can arise for a multitude of reasons. A shareholder could disagree about the amount of debt the company is taking on, there could be concerns about the direction a director is taking the company, a shareholder might feel like they’re not being properly informed about the company’s financial position, a minority shareholder could be feeling neglected by a group of majority shareholders, or it could be something else entirely.  

Ideally shareholders (and directors) would enter into a shareholder’s agreement during the company’s infancy. This would require decisions to be made unanimously or on certain percentages, with shareholder’s individual voting rights being attached to their owned shares and dividends. In many cases no such agreements leading to disputes further down the line. 

It’s incorrect to suggest that in each dispute there’s a morally good and bad party in these types of disputes. Every company is different, and all shareholders will have reasons for their beliefs and decisions. If your dispute is left unresolved it can become personal and emotionally charged, all of which could make it even more difficult and expensive to amend. Whatever the reason, resolving the dispute quickly is important for both the company and everyone involved.  

Whether you are a majority or minority shareholder it is crucial to understand what your rights are and what you can and cannot do, it’s also necessary to understand what influence other shareholders may have to stop you doing what you wish.  

What are my basic rights as a Shareholder? 

Every shareholder, no matter the amount of shares they own, are entitled to a basic set of rights. These include;  

• The right to receive notice of general meetings. 

• Access all general meeting minutes. 

• The right to be treated without prejudice and discrimination. 

• The right to have your name entered on the registry of members. 

• A share certificate.  

• The right to inspect the register of directors’ service contracts. 

Every company should also maintain the following registers which every shareholder is entitled to access:  

• Register of directors and secretaries  

• Register of directors’ interests in shares 

• Register of charges 

• Register of members 

What rights and powers does a majority (controlling) shareholder possess?  

As a shareholder operating within a private company your rights are based on the size of your shareholding; the greater amount of shares you own, the more rights you have. A majority shareholder is classed as a person or party who owns more than 50% of company shares. 

If the majority shareholder holds voting shares, they dictate the direction of the company through their voting power. The exception to a majority shareholder’s voting power is if a super-majority is required for a particular voting issue, or if certain company by laws restrict the power of the majority shareholder.  

Typically, majority shareholders have the right to control certain operations in and around the company; these include: 

• Voting power: They reserve the ability to cast their vote to approve of major transactions and decisions, shaping the company’s strategic direction. 

• Board representation: Majority shareholders will often appoint representatives to the company board which represent their interests, ensuring that company policy and procedure align with their intended goals.   

• Control over management: Similarly, to their board representation power, majority shareholders can also influence the selection and appointment of top-level executives which align with their corporate vision. 

• Asset sales and mergers: Majority shareholders have the power to approve or veto any potential sale of company assets or mergers with other parties. 

• Access to information: Majority shareholders also enjoy privileged access to all company information allowing them to make informed decisions within the context of the company’s financial performance. 

Majority shareholders are also privy to further rights depending on the amount of shares they own, these include: 

• Shareholding greater than 90% of shares: The right to consent to a short notice of a general board meeting. 

• Shareholding greater than 75% of shares: The right to pass a special resolution and to approve a compromise or arrangement with members. 

• Shareholding greater than 50% of shares: The right to pass an ordinary resolution (or deny one if the number of shares owned is 50%) 

What are my rights as a minority shareholder? 

Minority shareholders hold limited rights when it comes to company management, decision making and corporate strategy.  

The percentage of shares a minority shareholder has impacts their rights. The more shares they have, the more actions they can take: 

• Shareholding 5% or more 

• The right to require the circulation of a written resolution 

• The right to call a general meeting 

• The ability to prevent the re appointment of an auditor. 

• Shareholding of 10% 

• The right to call a poll vote at a general meeting and to require a company audit.  

• Shareholding greater than 10%

• The right to block consent to short notice of a general meeting.  

• Shareholding greater than 25% of shares 

• The right to block a special resolution 

• Ability to block a compromise arrangement with members or a class of members.  

As a shareholder, understanding your position within the context of your company’s financial structure is essential. It can be difficult and confusing to know what rights you have in relation to your shares. When entering a shareholder dispute, it’s important to get clarity on your position, so a plan can be outlined to end the dispute as quickly and as amicably as possible.  

Jackson Lees can help outline your options and the possible outcomes or consequences. We’re committed to providing professional and transparent advice, so you can be reassured that you’re getting the highest quality service for your business. 

Call us today or make an enquiry to get the ball rolling.