Shareholders

Question 1

Registers of members

Answer 1

1. Every company must either:
   a. Keep registers of members or
   b. Keep information on the central register at Companies house
2. Any transfer /allot new share to new shareholders must be reflected on the register/ notify the registrar within 2 months.
3. if 1 member, there must be a statement to that effect in the register. It is criminal offense if the register is incomplete or incorrect.
4. Register must be available for inspection to shareholders free of charge and to anyone else for a fee. Failure to allow inspection is also criminal offense.

Question 2

Share Certificate

Answer 2

1. Prima facie evidence of holder’s title to shares
2. Companies must issue share certificate with 2 months of allotment of share or of transfer of shares being lodged with the company.**

Question 3

Persons with Significant control (PSC) register

Answer 3

1. Companies must keep PSC register orkeep the info on central register of CH even if there is no such PSC
2. PSC can apply to keep residential and/or name private so it will not appear on public register of company house.
3. Any change to PSC register must be filed to CH within 14 days from the date company makes the change

Question 4

Shareholder agreements

Answer 4

1. =/ AoA : only binds shareholders party to the SA.
2. Main advantage: privacy and protection of minority shareholders (e.g. to include pro. party must not vote in favour of changing AoA unless all parties to SH agreed)
3. Common terms:
   a. restriction on transfer of shares
   b. Bushell v Faith clauses: give a sharehoder more weighted voting right in resolution to remove such shareholder from director position.
   c. non-compete clause

Question 5

Voting rights of shareholders

Answer 5

1. vote at GM by show of hand
2. Right to send proxy
3. Right to poll vote
4. Right to receive notice of GM
5. Right to requisition of GM
6. Right to apply to court to call a GM (e.g. where its not possible to hold meeting quorate)
7. 5% or 100 shareholders to require circulation of written statment
8. 5% to require circulation of written resolution and accompanying statement.

Question 6

Other rights of shareholders

Answer 6

1. Right to receive dividend: (i) profits are available; (ii) directors have made recommendation; (iii) shareholders apporve
2. Right to apply to court to** wind up** the company on the ground that its** just and equitable** to do so. (e.g. management is deadlock)
3. Right to remove a director/an audiitor by ordinary resolution
4. **Right to inspect **without charge : minutes of GM, all statutory registers, directors services contracts, any contract in relation to company purchase its own share
5. Right to receive a copy of company annual accounts and reports
6. Right to seek injunctions to refrain company from doing sth prohibited by its constitution.

Question 7

Types of shares

Answer 7

1. Ordinary shares: some companies will have dif. types of ordinary shares e.g. A and B attaching different rights in AoA.
2. Preference shares: no voting rights but enhanced right in some sort (e.g. to dividend.
   a. Cumulative: preference shareholder is paid any missed dividends from previous financial year and current year (rank higher than current year dividend of ordinary share)
   b. Non-cumulative: if dividend not paid in particular year, shareholder loses the right to that year.

Question 8

Other rights of Minority shareholders

Answer 8

1. Right to apply to **wind up ** the company
2. Unfair prejudice claim
3. Contractual rights under shareholders agreement and AoA
4. Derivative claim

Question 9

Grounds for unfair prejudice petitions

Answer 9

1.Company’s affairs have been conducted in a manner that is unfairly prejudicial to the interests of the members generally or part of its members
2.an actual or proposed act or omission of the company is or would be so prejudicial.
3.E.g.:
- diverting opportunities to a competing business in which majority shareholder hold interests
- awarding excessive pay to directors
- excluding a shareholder from management of the company when during incorporation, shareholders’ negotiations led to shareholder believing they would participate in management.
- removing of auditor by shareholders on grounds of divergence of opinion on accounting or audit procedures.

Question 10

Remedies for unfair prejudice

Answer 10

1. Order that other shareholders must by the shares of the unfairly prejudiced shareholder or the company to buy back those shares
2. restriction on company altering AoA without the court
3. order that unfairly prejudiced shareholder has permission to bring derivative action

Question 11

Derivative claims

Answer 11

1. a claim by any shareholder in the company’s name for wrongs committed against the company (usually breach of duty by a director)
2. Shareholder must apply for court for permission to bring the claim:
   a. claim must promote success of company,
   b. director’s breach has not been or was ratified/authorised by the company’s board or shareholders.
   c. whether shareholder acts in good faith
   d. whether the company has decided not to pursue with claim
   e. whether the act or omission give rise to a cause of action that a member could pursue in their own right