5 - BL - Shareholders Flashcards
What remedy is available to members by reference to the articles if their rights as members are infringed?
- They can Sue under s33 CA 2006
- Remedy is damages 💵
What are the ‘members rights’?
- right to dividend 💵
- right to share in surplus capital 💰
- Right to receive notice of GM & AGMs 📆
- right to vote ✔️
NOTE: the right needs to be a MEMBERSHIP right - so rights in Articles that are not membership rights are not covered (such as right to be appointed as Sols).
What rights do all shareholders have?
- Receive a notice of a GM
- Appoint a proxy to attend a GM in their place
- Receive a dividend (if declared)
- Receive a copy of the coy accounts
- Inspect minutes and registers
🚨 - Ask the court to prevent a breach of directors’ duties 👮♂️🎩
- Commence a derivative claim 🥸
- Bring a petition for unfair prejudice 💩
- Bring a petition for just and equitable winding up 💥
Can members request to review or get a copy of the register of members?
Yes - they cannot be charged a fee but people who are not members an be charged a fee
What is the process for reviewing/obtaining a copy of the register?
- make a request ✍️
- Company must comply within 5 working days, or 🤝
- *^apply to court** to refuse if it believes the request is not for a ‘proper purpose’ 🤬👨⚖️
What rights do holders of 5% share capital have?
- Require directors to call a GM 🗣️
- Require the circulation of written statements regarding proposed resoluitions at a GM 🗒️
- Circulate a written resolution 📝
What rights do holders of 10% or more share capital have?
Demand a poll vote
What rights do holders of OVER 25% share capital have?
- Block a special resolution
(a special resolution needs 75% or more vote)
What rights do holders of OVER 50% share capital have?
- Pass or block an ordinary resolution
NOTE: Ord Res requires OVER 50% to pass. Therefore 50% SH can block but cannot force one through.
What rights do holders of OVER 75% share capital have?
Pass a special resolution
Removal of Directors:
What is the section that gives shareholders the right to remove a Director?
S.168 CA 2006
Removal of Directors:
What resolution is required to remove a director?
Ordinary resolution requiring over 50% of the vote
Removal of Directors:
What notice is required from the shareholders to remove a director by s.168 CA 2006?
A special notice under s.312 must be issued by the shareholders to the board at least 28 clear days before the proposed GM.
⭐️📆
(Board can then chose to table the resolution at the GM or not)
Removal of Directors:
Can a company remove a director by written resolution under s.168 CA 2006?
No
Removal of Directors:
If the directors agree to a s.312 notice, how much notice must they give the members of the proposed resolution?
14 clear days before the GM
(which means 28 clear days between the special notice from the SH and the GM at which the resolution will be voted on.)
Removal of Directors:
If the directors DO NOT agree to a s.312 notice, how can the members force the issue and how many votes do they need?
5% Can require the directors to hold a GM under s.303 CA 2006 and may include the text they want included. This requires that the board issue a notice of a GM within 21 clear days.
- 5%
- 21 clear days
(A s.303 notice is normally issued at the same time as a s.312 notice).
Removal of Directors:
What must the directors do if they receive a s303 request?
- call the GM within 21 days of the notice;
AND👈 - the GM must be no later than 28 days after the date of the notice calling the GM👉
- 50 days
So the GM to vote on the resolution can be up to 50 days of the original notice (21 days to notify GM giving 28 days notice).
Removal of Directors:
What if the directors receive a s303 request but do not call a GM?
- The shareholders who submitted the s.303 request (or at least half of them by voting rights) can call the GM themselves under
- s.305 CA 2006 for which they must give - 14 days clear notice
- total of 38 days from the date of the original s.312/303 notices).
Removal of Directors:
What are the time limits for the GM if the directors do not call a BM within 21 days and the members call for it themselves pursuant to a s.305 CA 2006 request?
- Must give at least 14 days clear notice of the GM
- GM must be HELD within 3 months of the date that the directors RECEIVED the s.303 request.
So, GM can be 38 days from notice (21 days for board to fail to call GM and then 14 days after members issue notice of GM)
NOTE: the SH can recover their reasonable costs from the comapny.
Removal of Directors:
What steps will unhappy shareholders normally take when notifying the board?
- Send a s.312 special notice
AT SAME TIME - Submit s.303 request
Removal of Directors:
What is the timeline where the board DOES co-operate with a s.303 Notice?
Day 1 = SH issue s.303 notice
Day 22 = Board calls an GM (Board has 21 days to decide whether to call an AGM from date of notice)
Day 50 = GM held (as has to be held within 28 days from the date the board called for it)
Removal of Directors:
What is the timeline where the board DOES NOT co-operate with a s.303 Notice?
Day 1 = SH issue s.303 notice
Day 22 = Board decides not to call an GM (Board has 21 days to decide whether to call an GM from date of notice)
Day 23 = as board has not called an GM, the SH now can given notice of GM.
Day 38 = GM held (must have 14 days clear notice from SH) (although SH have up to 3 months from the date of s 303 request if they wish).
Removal of Directors:
What are the rights of the director?
If the company receives notice:
- The company must immediately send a copy of the notice to the director
- Director can provide representations in writing (must be reasonable length) and should (if company has time) be circulated to members. If no time, the reps should be read out in the GM.
- Director has right to be heard at GM whether or not they are a shareholder.
Removal of Directors:
What is a Bushell v Faith clause and what’s its effect?
Art. may give director weighted voting rights at a GM at which a s.168 resolution is proposed. Means its unlikely the Shareholders will be able to remove the director.
Removal of Directors:
Will the removed director be entitled to any compensation?
- Any payments will need to be passed by Ord Res. unless:
a) the payment does not exceed £200
b) the payment is made in good faith:
- in discharge of an existing obligation
- by way of damages for such obligation
- in settlement or compromise of a claim in connection with termination of a person’s office or employment
- by way of pension for past services
NOTE: this is separate from any breaches of the dir’s employment contract.
Removal of Directors:
Will the payments of compensation to a director of a company’s holding company also need the approval of the shareholders of the parent?
Yes
Removal of Directors:
Will the payments of compensation to a director need the approval of the shareholders of the company’s subsidiaries?
No
Removal of Directors:
What process is required for payments of compensation to a removed director?
A memo 📝setting out the payment must be made available to the shareholder for 14 clear days before the ordinary resolution is passed at GM.
Derivative claims:
What is a derivative claim?
🥸
A claim that is derived from the company’s right of action, which the company has not exercised.
Derivative claims:
What is the legislation for bringing a derivative claim?
🥸
s.260 CA 2006
Derivative claims:
In what circumstances can a derivate claim be brought?
🥸
- Where the directors have breached their statutory duties. 💥
- director need not have benefited from the breach 💰❌
- action is on behalf of the company, not the individual shareholder. 🏭
“brought in respect of a cause of action arising from
- ACTUAL💥or PROPOSED💡 ACT or OMISSION🫥 involving
- NEGLIGENCE, DEFAULT, BREACH OF DUTY OR TRUST by a
- DIRECTOR🎩 of the company.”
Includes common law duties and shadow directors 🧛
NOTE: any remedy is granted to the company, not the shareholder.
Derivative claims:
Can third parties (other than directors) be defendants to a derivate claim?
🥸
Yes, but the claim has to be in respect of a breach by a director.
😔🎩
Derivative claims:
Who can bring a claim and does it matter when the cause of action occurred?
A member can bring the claim but its immaterial whether they were a member when the breach occurred. But a former member cannot bring a claim.
Derivative claims:
How many stages are there in bringing a derivative claim?
Two
What is the first stage of a derivative claim?
Obtain permission to continue the claim. The onus is on the member to make out a prima facie case.
🧑⚖️👉
What is the second stage of a derivative claim?
The court will consider the substantive claim.
When considering a derivate claim, what must the court have particular regard to?
The views of the members who have no personal interest in the matter
Unfair Prejudice:
Who can apply for Unfair prejudice order under s.99
💩
A Member
Unfair Prejudice:
Is negligent or inept malmanagement ‘unfair prejudice’?
🤡💩
No
Unfair Prejudice:
Are disagreements as to company policy unfair prejudice?
💩
No
Unfair Prejudice:
Does the claimant need to show bad faith?
💩😈
No
Unfair Prejudice:
Does the claimant have to come to the court with clean hands?
😈🤲
No
Unfair Prejudice:
Can Legitimate Expectation form the basis of unfair prejudice?
💩
Yes - especially in small companies where the shareholders expect to be involved.
Unfair Prejudice:
What are the remedies for UP and what is the most common remedy?
💩
- The court has such power to grant such order as it thinks fit
🦸 - the most common order is the repurchase of the petitioner’s shares.
👉🏭
Unfair Prejudice:
How are shares valued?
💩
a) use the method in the articles (if any)
📝
b) apply to court
- court will not normally apply a minority discount
- valuation date is the date of the court order
- behaviour of claimant may be relevant e.g. if they previously rejected a reasonable order.
Just and equitable winding up:
When will a winding up apply?
💥
just and equitable to do so.
⚖️
What are the main rights and remedies available to shareholders?
- shareholder agreements 🤝
- membership rights 🧔♀️
- shareholders rights under 2006 s.33
- removal of directors 🎩💥
- derivative actions 🥸
- unfair prejudice 💩
- just and reasonable winding up 💥
What % of shares is required to ask the court to prevent a breach of directors’ duties
Any shareholder
What % of shares is required to commence a derivative claim?
Any shareholder
What % of shares is required to petition for unfair prejudice?
Any shareholder
What % of shares is required to petition for just and equitable winding up?
Any shareholder
What % of shares is required to call a GM
5%
What % of shares is required to circulate a WR
5%
What % of shares is required to require the circulation of a written statement regarding proposed resolutions to be considered at GM?
5%
What % of shares is required to demand a poll vote
10%
What % of shares is required to block a special resolution?
More than 25%
What % of shares is required to pass or block a OR
50% block
Over 50% pass
What % of shares is required to pass a SR
75%
Can directors who are shareholder vote as members on resolutions for their removal?
Yes
What’s is a s.312 notice?
A notice by the shareholders that they want a removal resolution under s.168. Must be served 28 days before the GM.
What is a s.303 notice
Request by 5% of members requiring board to call a GM.
Directors must give convening notice a GM within 21 days from the date of the s.303 notice to be held within 28 days of the convening notice.
If, by the 21st day the directors haven’t called the GM, 51% of the members behind the s.303 notice can call a GM under s.305 with 14 clear days notice up to 3 months of the date the 303 request was received by directors.
When is a s.303 notice typically issued
A s.303 notice demanding notice of a GM is given within 21 days of the notice is normally issued at the same time as a s.312 special notice of the removal of a director.
What resolution is required to change a company name?
Special resolution
If voting is tied, does the chairman get the casting vote?
No - not in 2006 companies
What is required to alter articles?
- special resolution
AND - interest of the company as a whole (minority interests considered here).
If a special resolution is called but no Poll, how does voting work
Each member has one vote regardless of shares. Therefore, a resolution could be passed with fewer than 75% of the voting shares.
