Shareholders – Definition, Roles, Rights Resolution of Disputes

Shareholders are members who hold shares of a company’s stock. They buy the stock by paying money whatever the stock is worth at the time of buying. The shareholders with largest shares are given place in the company’s board and hence take part in decision making.
Roles of shareholders

• General meetings: As shareholders, they have to call for general meetings as and when necessary. The directors of the company who are not shareholders cannot vote. But they can vote in board meetings.

• Annual general meetings: As per the UK’s Companies Act of 2006, there is no longer any requirement of AGM if the company is a private company. But the meeting might be called upon if the shareholders wish to. Public companies must hold AGM every 6 months.

 

• Acting as chairman of the meeting: The chairman is a shareholder and the head of the meeting whose job is to keep the meeting going in order. He/she will declare a resolution passed or not after the voting has taken place.

Duties of shareholders

• Passing of ordinary resolution: With a simple majority of more than 50% is enough to vote in favour an ordinary resolution.

• Passing of special resolution: A clear cut majority of 75% is essential to pass a special resolution. Such a resolution will be carried out only if the company’s terms consider it to be so.

• Chairman’s vote: The chairman does not normally vote. He acts only as a mediator. But if any deadlock arises and requires a decision, the chairman’s vote can help resolve the deadlock.

Rights of shareholders

• Shareholder with 100% holdings can do anything. They can grant authority to directors, can ask for accounts before the general meetings, can dispense AGMs,
• Shareholders with 95% holdings can hold extraordinary general meeting on short notice.
• Shareholders with 75% holdings can pass special resolutions.
• Shareholders with more than 50% holdings can pass ordinary resolutions.
• Shareholders with more than 25% holdings can block special resolutions.
• Shareholders with 10% holdings can call for EGM upon written request.
• Shareholders with 5% holdings have the right to refuse to consent to short notice with written request, can have an item place in the agenda of AGM and can circulate written statements.

Shareholder disputes and remedies

The section 459 of Companies act, 1985 states that a member [shareholder] may apply to court against any act of the company which seems unfair and prejudicial. This section is mainly for the protecting the minor shareholders from the unfair prejudicial act of major shareholders. The complaint made by the member must be very specific.

The law establishes orders in case of any complaint made by the minority shareholder. The most common remedy given by court in such cases is that the majority shareholders purchase the minority shareholder’s shareholdings.

The best way to understand the shareholder’s rights is to get legal advice from a commercial attorney.