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Company formations 2015 - View statistics (/company-formations-2015/)

What rights do shareholders have?

Written by Johnathan Korchak

(http://www.informdirect.co.uk/author/john/) (http://www.informdirect.co.uk/author/joh
Published in Shares and shareholders
(http://www.informdirect.co.uk/shares/)
on March 21, 2014

While shareholders (http://www.informdirect.co.uk/shares/shareholder-role-risk-and-rewards/)

collectively own a company, they do not control the day to day running of it thats the role of the
company directors. In exchange for their investment, however, shareholders have a range of
rights available and retain power over certain major company decisions.
Shareholders rights arise in the main from the Companies Act 2006. However, these may be
modified by the companys articles of association (http://www.informdirect.co.uk/companyrecords/memorandum-and-articles-of-association-explained/), a shareholders agreement
(http://www.informdirect.co.uk/shares/what-is-a-shareholders-agreement/) and possibly under
the terms of a specific share issue (http://www.informdirect.co.uk/shares/why-issue-shares/).
Different shareholders rights may also attach to different classes or types of share
(http://www.informdirect.co.uk/shares/types-of-share-a-company-can-have/) and some are only
available to those with a certain percentage of the shares in issue.

Manage your company's shares the easy way

Inform Direct is the innovative and straightforward way to make new share allotments,
record share transfers and process share reorganisations.

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now
Find out more (http://www.informdirect.co.uk/what-does-it-do/#update-shareholder-records) | Log on
(https://secure.informdirect.co.uk/Account/LogOn)

In this article we look at the most basic shareholders rights that are generally available so they
usually apply to all shareholders, regardless of how many shares they hold.

Inform Direct company secretarial software will ease the administrative burden of corporate life.

1 To attend general meetings and vote

Use for free - start now

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All shareholders have the right to receive notice of general meetings and attend them. This
includes both Annual General Meetings and Extraordinary General Meetings, but does not
extend to meetings of the company directors.
Shareholders will usually have the right to vote at the General Meeting. Typically, shares will
carry one vote each but thats not true in all cases:
There may be non-voting shares which carry no voting rights at all
Some shares may give the holder the right to multiple votes per share
Some shares may only give a right to vote in certain circumstances
If the shareholder cannot attend a General Meeting, they also have the right to appoint a proxy to
attend and vote on their behalf.

2 To receive a share of the company's profits

The company can choose to distribute profits by payment of a dividend to shareholders. A
dividend can only be paid from profits and, even if the company is profitable, there is no obligation
on the directors to declare a dividend. Shareholders cannot vote to pay a dividend which is more
than the directors have recommended.
Usually the dividend will be a fixed amount paid per share, although variations from this are
possible. Some classes of share might have no right to dividends or only qualify for dividend
payments if certain conditions are met.

3 To receive certain documents from the company

The main documents of interest to shareholders will be the companys annual report and

accounts. Each shareholder has the right to receive these when theyre issued generally and on
request. Shareholders also have the right to receive a copy of any written resolution proposed
by either the directors or shareholders.
Many companies will issue other documents and updates about the company. However, its worth
noting that shareholders have no right to receive most other documents so, for example, they
cannot usually demand to see copies of the management accounts prepared for the directors.

While there is no absolute right in law to receive a paper share certificate, most
companies will issue them

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We often get asked whether shareholders have the right to receive a share certificate
(http://www.informdirect.co.uk/shares/share-certificates-what-you-need-to-know/). While
there is no absolute right in law to receive a paper share certificate, most companies will issue
them and its often required by the companys articles of association. A shareholder does,
however, have a right to have their name listed in the companys Register of Members
(http://www.informdirect.co.uk/company-records/register-of-members/) which is the legal
proof that someone is a shareholder in the company.

4 To inspect statutory books and constitutional documents

The Companies Act 2006 gives shareholders the right to ask to see a number of documents. For
example, these include:
The Register of Members (http://www.informdirect.co.uk/company-records/register-ofmembers/) (under section 116 of the Companies Act)
The terms of directors service agreements (section 229)
The terms of directors indemnity provisions (section 238)
Records of resolutions and minutes of general meetings
Shareholders also have a right to access the companys constitutional documents usually made
up of at least the memorandum and articles of association
(http://www.informdirect.co.uk/company-records/memorandum-and-articles-of-associationexplained/). As these documents may lay down additional rights of shareholders or restrictions on
shareholders rights, its a good idea for all shareholders to look at them.

5 To any final distribution on the winding up of the company

If the company is wound up, creditors will generally all need to be paid first out of any funds
available. If, however, there are then surplus funds, these monies can be shared amongst the
shareholders usually in proportion to the number of shares they hold. However, different share
classes may have different rights to a distribution in these circumstances.

Alongside the rights of shareholders, there is some protection afforded to the owners of a
company by the responsibilities of directors (http://www.informdirect.co.uk/officers/directorresponsibilities-and-duties/), which again have their origins in the Companies Act 2006.
In our next article well look at the actions and remedies available to minority shareholders to
help protect their interests.

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Inform Direct is the innovative and easy way to manage a company's shares, make new share
allotments, record share transfers and more.

Start now
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Related Articles
How to issue shares step by step (http://www.informdirect.co.uk/shares/how-to-issueshares-step-by-step/)
How to transfer shares a step by step guide
(http://www.informdirect.co.uk/shares/transfer-shares-step-by-step-guide/)
How to produce share certificates (http://www.informdirect.co.uk/shares/free-sharecertificate-template-production/)
What you need to know about joint shareholdings
(http://www.informdirect.co.uk/shares/joint-shareholdings/)
Understanding your responsibilities as a director
(http://www.informdirect.co.uk/officers/director-responsibilities-and-duties/)

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