Minority Shareholders’ Rights (Part 1 of 2)
You are holding a minority share in your company, & you feel you are being treated unfairly by your other majority shareholders, feeling oppressed, so what should you do ?
There are several rights at law that the minority possess to protect their interests and ensure that they are treated fairly.
Let me share this topic in 2 parts…
Part 1 of 2 :
1. Rights Under The Memorandum & Articles Of Association.
* The M&A of a company are the constitutional documents of a company.
* The M&A are important documents as they set out and regulate among other things the objects of the company & the manner in which the company to be managed.
* The M&A take effect in law as a contract between not only the shareholders & the company, but between each individual shareholder and every other.
* Generally, an affected individual shareholder may bring an action in court to prevent any proposed breach of the M&A.
In appropriate cases, the court may also set aside acts done in breach of the M&A.
* The law provides that the M&A can only be amended by a special resolution, that is to say a resolution passed by a majority of not less than three-fourths of the shareholders voting.
* The M&A is therefore an important starting point for a shareholder who may feel aggrieved.
* A shareholder is entitled at law to a copy of the M&A, and on request, the company is required to send a copy of the M&A to the shareholder.
2. The Right To Information
The following are some of the sources of information on a company.
* The register of shareholders – provide information as to the names & addresses of the shareholders & their shareholdings.
* The register of directors, secretaries, managers and auditors – contains certain prescribed information on the personal particulars of these persons and of their appointments.
* Register of director’s shareholdings kept at the registered office that would among other things show a director’s shareholding in the company or in a related corporation, and whether any director has rights or options to acquire or dispose of shares in the company or a related corporation.
* The register of substantial shareholders – provide information on persons interested in > 5% of the voting shares in the company & the extent of their interest
* The register of debenture holders and the register of charges – a document which creates or acknowledges a debt, provides particulars of debenture holders to whom the company has issued debentures (other than debentures transferable by delivery) and the amount of debentures held by them, provides information relating to most forms of security granted by a company to secure obligations of the company.
* The minute book of general meetings – required to be kept or proceedings of all general meetings of the company.
* The audited profit and loss accounts of the company, the auditors’ report and the directors’ report.
These reports are required to be sent to shareholders not less than 14 days before the general meetings of the company at which the accounts are to be presented.
These documents provide useful information relating to the financial affairs of the company.
3. The Right To Attend, Vote And Call General Meetings Of The Company
* A shareholder has a right to attend any general meeting of the company.
* A shareholder is also entitled to speak at the meeting.
* General meetings of companies are important occasions for minority shareholders, especially of large companies, as it is an occasion to meet and ask questions of the management.
* Further, shareholders of a company (other than those holding non-voting preference shares) are entitled to vote on any resolution.
* Extraordinary General Meeting (“EGM”) of a company may be called.
2 or more shareholders holding not less than 10% of the issues share capital of the company, or such lesser number as is provided in the Articles, may call for an EGM.
( to be continued…look out for Part 2 of 2 )
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