Rights of a Shareholder
Our experts can help you to understand and exert your rights as a shareholder and achieve your commercial goals.
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What is a share?
A share is essentially a unit of capital that expresses the ownership relationship between the company and its shareholders.
Generally speaking, the more shares that you own, the more power you have to shape a company’s future.
It’s common to see many different types of shares, such as ordinary shares, preference shares or redeemable shares. Each offers different rights and responsibilities to shareholders.
‘Alphabet’ shares have become increasingly common, where a class of shares (such as ordinary shares) is divided into ‘A’ shares, ‘B’ shares, ‘C’ shares and so on. Typically, the purpose of this is to allow the ‘A’, ‘B’ and ‘C’ shares to be treated differently in some way.
More shares, more rights, more power
The Companies Act affords greater rights and powers to an individual as the size of their shareholding increases. Also, with a larger shareholding, it's more likely that the owner in question may have a controlling interest in the company.
For example, if you own 5% of a company, you have the right to require the company to convene a general meeting of shareholders and circulate to shareholders a statement relating to a matter to be considered at the meeting. Another illustration is that once your stake in the company reaches 10%, you have greater rights including the right to force a formal audit of the annual accounts.
No matter what shareholding you hold, our experts can advise you on your associated rights and how to exercise them.
How large a shareholding do I need to exercise control over a company?
Even if you own shares in a company, you can’t necessarily fully control its future. In the great majority of limited companies, you’ll own a large enough share to control the company with a shareholding of over 50% of the issued share capital.
Having control of the company gives you the power to play a decisive role in dictating the makeup of the board of directors, as well as to carry out most of the acts which are necessary to run the company in its everyday business, meaning you can ensure your interests are protected.
Owning less than 50% of a company doesn’t mean that you have no control. You’ll just have to act decisively to ensure that you aren’t left at the mercy of those who own more than 50% of the shares.
Complete list of shareholder rights
Get a list of the key rights and restrictions that apply at all levels of shareholding in private companies to safeguard your interests.
As a shareholder, the more aware that you are of your rights, the easier it is to protect your commercial interests.
It’s wise to familiarise yourself with the different rights and restrictions to safeguard your interests.
Here, Paul Lunt provides a list of the key rights and restrictions that apply at all levels of shareholding in private companies.
Who’s responsible for enforcing breaches of shareholder rights or company law?
In England and Wales, the responsibility for enforcing breaches of shareholder rights or company law falls on you and your fellow shareholders — so you need to be aware of the options available.
Various government agencies may also take enforcement action against company directors, depending on the nature of the wrongdoing. The Insolvency Service, for example, operates an Investigations and Enforcement team that’s often willing to take such action. Similarly, the Serious Fraud Office enforces bribery and corruption claims. The Police can take steps to enforce criminal conduct such as theft from the company.
As a shareholder, you have the right to take out civil proceedings to enforce your rights. In certain circumstances, you even have the right to pursue private prosecutions.
Knowing which steps are most appropriate — and making tactical decisions around when to deploy them — can be complex. Our team is on-hand to help.
Awareness of director duties & obligations
In practice, the strict rights and entitlements that come with the ownership of shares in a limited company are seldom fully used or exploited by shareholders. This is largely because shareholders are generally unaware of the rights that they have simply by virtue of being a shareholder.
Similarly, most company directors would be alarmed at the strict duties that they owe to the company. These include maintaining registers of its directors and their usual residential addresses, the company’s shareholders and people with significant control over the company. By law, these registers must be kept open to inspection by shareholders.
For many of the obligations upon directors, a breach can be a criminal offence under company legislation, so it's even more important for you as a shareholder to be aware of your rights and the duties owed by the company directors.
We understand what matters to shareholders and what your rights are so that you can use them to your advantage.
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