Shareholders play a vital role in companies with share capital and limited liability. Regardless of share type or class, all shareholders have certain rights designed to protect their investment and ensure accountability of directors.
Understanding these rights helps safeguard your interests, secure dividends, and maintain fair treatment.
Shareholder rights in the UK are primarily governed by the Companies Act 2006, which ensures:
- Protection of your investment
- A voice in major company decisions
- Remedies if treated unfairly or prejudicially
Companies must maintain a Register of Members (listing shareholders) and Articles of Association, which outline company rules, exit strategies, and dispute resolution processes.
Key shareholder rights
- Share Certificate: every limited company must issue a share certificate within two months of incorporation, allotment or transfer. This acts as proof of ownership and must be recorded in the company’s Register of Members.
- General Meetings: shareholders can attend meetings where decisions requiring shareholder approval are made. Notice periods are set by law, and you may appoint a proxy if unable to attend.
- Voting: voting rights depend on share class and percentage held. Votes may occur via written resolutions or at meetings. Articles of Association and shareholder agreements may grant additional rights.
- Reports and Accounts: you have a statutory right to receive annual financial statements prepared for Companies House and HMRC.
- Company Records: while you cannot inspect all company documents, you can access the register of members, meeting records, written resolutions, directors’ service contracts, Articles of Association and annual reports.
- Dividends: shareholders are entitled to a share of distributable profits declared as dividends, proportional to their shareholding.
- Transfer of Shares: you may transfer shares, subject to restrictions in the Articles of Association or shareholder agreements.
- Pre-emption Rights: often, shareholders have the right to buy new or existing shares before they are offered externally, typically in proportion to their current holding.
- Director Accountability: if directors breach duties or act negligently, shareholders can bring claims, including derivative actions, to hold them accountable.
It is important to note that these rights generally apply to holders of ordinary shares and may vary by share type and percentage.
Minority shareholders hold less than 50% of shares and majority shareholders hold more than 50%. Shareholders can combine holdings to strengthen their influence.
Shareholder rights are complex and depend on share type, Articles of Association and agreements. Disputes often arise over share valuation and affordability during buyouts. Deadlocks may require legal proceedings to enforce rights or resolve conflicts.
Woodfines’ corporate commercial team can help navigate these challenges, offering tailored advice and strategies to protect your interests.
Contact a member of the team at corporatecommercial@woodfines.co.uk for tailored legal advice, or
visit the website here.
Neil Gibbs
Equity Partner
Corporate Commercial
Woodfines Solicitors
