While shareholders own a company, they do not have control of the day-to-day running of it. Often, issues may arise where a commercial litigation lawyer’s advice is needed. Here are some rights that shareholders hold and should be aware of:
1. To Attend General Meetings
All shareholders have the right to receive advanced notice of any meetings and have the opportunity to attend these meetings. This includes not only annual general meetings but extraordinary general meetings as well. However, this has its limitations as the right does not extend to the meetings of the company’s directors.
2. Vote on Decisions
At meetings, shareholders will usually have the right to vote on various decisions and matters. Usually, one share will be equal to one vote, but this can vary slightly from one company to the next. There is the possibility that there are non-voting shares, which carry no voting rights, where as some other shares may give the holder the right to make multiple votes. In rare situations, certain shares will only provide the right to vote in limited circumstances. It is important for shareholders to know exactly where they stand in relation to what their shares mean for voting opportunities.
3. Share of Company Profits
The company can choose to distribute profits by payment of a dividend to shareholders, this can only be paid directly from actual profits and not just any other business income. There is no obligation for the directors to declare a dividend, and shareholders cannot vote to pay a dividend that is higher than the directors have recommended and agreed upon. Typically, the dividend will be a fixed price per share, although this varies within different companies.
4. Receive Documents
Shareholders are often interested in the annual report and accounts of the company to which they hold shares, and they have the right to receive these documents. Shareholders also have the right to receive any written resolution that has been proposed either by other shareholders or the directors of the company. Many companies issue more documents than necessary and offer shareholders further information; however, they are not obliged to do so.
5. Inspect the Books
The law gives shareholders the right to request and review a number of documents, including those that are based on members, service agreements, indemnity provisions, and the records of minutes of meetings and resolutions.
6. Inspect Constitutional Documents
Shareholders always have the right to look at the company’s constitutional documents; these are usually made up of a memorandum and articles of association. These documents may lay down extra rights for shareholders and so it is important that shareholders view these and take into account any information that relates to them and their entitlement.
7. Distribution on Winding Up
If the company decides to wind up or close down, creditors bills will typically be satisfied first. If there is any money or profit left over, then the shareholders will be entitled to receive some funds based on the number of shares they hold within the company.
Shareholders should be aware of their rights and ensure that these entitlements are being satisfied by the directors and others involved in running the company. If not, seek the help of a commercial litigation lawyer.