Shareholders form a very important role in a company through their provision of investment into the company. It is always sensible as a shareholder to understand what rights come with your position and what you can do to enforce them.
Types of shareholding
Shareholders can vary enormously in nature depending on the type of company.
- a small or medium sized business will often see a cross over between the shareholders and the directors, all of whom will consider themselves as business owners;
- alternatively, in a large publicly listed company, shareholders own such a small part of the business that they are not considered business owners, but investors who invest in order to see a return on their investment.
The rights and ownership over a company are normally commensurate with a shareholders shareholding. In a small business where the shareholders are the business owners and the directors, then it is less likely that there will be a shareholding of significant value. It may even be that shares are provided with a nominal value, for example £1. However, they still retain the same control as other directors of equal shareholding and the same voting rights.
In a listed company, shareholdings are more likely to be differentiated by the value of the shareholding held, i.e the sums invested.
Shareholders ability to manage the company
In general, shareholders do not have a role in the day to day running of the company simply by their shareholding. They are only entitled to limited information and do not attend directors board meetings to make decisions on the day to day running.
This is different if a shareholder is also a director, but any control in that respect is purely because of their directorship not shareholding.
Shareholders have some power over directors’ actions by way of voting rights. This would usually involve decisions over the direction of the company and structural alterations or amendments to the constitution such as changing directors, as well as the declaration of dividends. Other specific powers may be given to shareholders in the company’s Articles of Association, and if the company has entered into a shareholders agreement which provides bespoke powers to a shareholder or specific class of shareholders.
One of the shareholder’s abilities is to remove directors. It doesn’t have to be proved that a director was acting wrongfully as long as more than 50% of the shareholders in value pass a resolution for the removal of that director.
The main powers of shareholders are to those with majority interests, meaning that their shareholding value is more than 50% of the total shareholding value. Otherwise, minority shareholders have little ability to influence resolutions unless they join with other minority shareholders to vote together to bring a vote to above 50% of the shareholding value in total.
Interaction with directors
In a large company where shareholders are merely investors and have no day to day involvement in the company then they would inevitably have very little or no interaction with directors.
However, in smaller businesses where the shareholders are also the business owners, they are very likely also to be registered directors. If not, they may unknowingly be acting as directors in either a shadow or a de facto capacity if they are very involved in the decision-making and day to day running of the company.
If a company is a publicly listed company or an AIM listed company then the valuation will be fairly straightforward and will be the valuation listed for that day.
However, for privately owned companies, valuations are much more complex, and can depend on any number of matters.
Whilst shareholders who are not directors have very little ability overall to manage the company, they do have some remedies if they believe that there has been abusive control by directors or there are areas of dispute between the shareholders and the company. Read more here about the remedies available.
At Francis Wilks & Jones we have many years of experience advising shareholders and directors on their roles within the company and specifically if they are in dispute. Contact us for a chat to see where we can help you. The most common areas for you to be concerned with are likely to be the following:-
- shareholders ability to manage the company;
- shareholders ability to remove directors;
- minority interests;
- shareholders interaction with directors;
- how much are my shares worth?
- minority discounts on shares;
- pre-emption rights.
At Francis Wilks & Jones you will always speak to someone at a senior level who will respond to any query you have immediately. Please call any member of our team for your consultation now – or email us with your enquiry and we will call you back at a time convenient to you.