Shareholders - Rights and Remedies Flashcards
(16 cards)
What challenges does majority rule pose for minority shareholders?
Minority shareholders may have little influence on decisions unless they can block or contribute to a majority. Remedies are available, but can be costly and uncertain
What does s.33 on CA provide regarding membership rights?
A company’s constitution binds the company and its members as if it were a contract, allowing members to enforce membership through legal action
What type of rights have been recognised as enforceable membership rights?
- A right to vote at general meetings
- a right to receive notice of general meetings
- the right to receive declared dividends
- the right to surplus assets on winding up
What type of rights are not enforceable under s.33?
Non-membership rights, such as right to be appointed company solicitor
Can courts imply terms into Articles of Association to protect shareholders?
No - Articles are treated as a complete contract, and courts will not imply terms to create business efficacy
What is a shareholders’ agreement?
A contractual agreement between shareholders regulating how the company will be run and how shareholders will vote on certain matters
Why are Shareholders’ Agreements useful in addition to Articles?
- They provide enforceable personal rights
- They allow greater flexibility than Articles
- They include terms not permitted in Articles
- They are private unless referenced in the Articles
How do Shareholders’ Agreements help minority shareholders?
They can include reserved matters that require unanimous consent or veto rights, giving minority shareholders leverage over key decisions
Can shareholders’ agreement prevent the removal of directors?
No - shareholders cannot remove the statutory right to remove a director, but breaching a Shareholders’ Agreement can give rise to a contractual claim for damages
How are changes made to a Shareholders’ Agreement?
Only with the unanimous consent of all parties, giving each party a veto on amendments
What rights do shareholders have regardless of how many shares they hold?
- Receive notice of GM
- Appoint a proxy to attend in their place
- Vote at general meetings if holding voting shares
- receive dividends (if declared)
- receive accounts
- Inspect company registers and minutes
- Take action to prevent breach of directors’ duties
- Commence a derivative claim
- Bring an unfair prejudice petition
- Petition for just and equitable winding up
What additional rights are available to shareholders holding at least 5% of shares?
- Require the board to call a general meeting
- Require circulation of written statements at general meetings
- Circulate written resolutions
What rights do shareholders holding 10% or more have under the MA?
They may demand a poll vote
What rights do shareholders holding more than 25% have?
They can block a special resolution, as it requires 75% approval
What rights do shareholders with more than 50% of voting shares have?
They can pass or block ordinary resolutions, which require over 50%
NOTE: a shareholder with exactly 50% can block but cannot pass an ordinary resolution alone
What rights are conferred by owning 75% or more of the shares?
The shareholder can pass a special resolution alone
