Shareholders duties, rights and powers

Question 1

what duties do SHs have?

Answer 1

• Duty to pay for shares as agreed i.e. under the MAs, all shares must be paid in full. This can be disapplied. If so, the shares must be paid when contractually obliged or on winding up
• Contractual duty to adhere to the AAs and any shareholder agreement

Question 2

what is a SH agreement and common provisions?

Answer 2

Creates a contract between SHs party to it. It does not bind/regulate the company.

Common provisions:
o Transferring shares i.e. restrictions or first right of refusal
o Agree to vote a particular way on a matter(s), like removal of a D
o Non-compete clause

Question 3

what powers do SHs have? (4)

Answer 3

• Power to demand a GM
• Power to object to a short notice GM
• Power to authorise / refuse decisions which require SH resolution
• Power to remove a director / auditor

Question 4

what rights do SHs have (inc. voting rights)? (6 voting rights + 6 other rights)

Answer 4

• Right to sue for breach of contract if the company or another SH breaches the AAs (the AAs are a contract between the SHs/company)
• Right to company accounts and reports
• Right to inspect the following free of charges:
  o GM minutes and resolutions passed
  o Statutory registers
  o D’s service contracts
• Voting rights, i.e.:
  o Right to a poll vote
  o Right to attend GMs (even if they don’t have voting rights)
  o Right to appoint a proxy to vote on their behalf if they can’t attend
  o Right to notice of a GM
• Right to receive dividends if recommended by the BOD
• Right to bring a derivative claim

Question 5

what protections do minority shareholders have? (5)

Answer 5

• Bushell v Faith clauses
• SH agreements
• Statutory derivative
• Unfair prejudice claims
• Just and equitable winding up