Members Flashcards
What are shareholders also known as?
Members
How does one become a shareholder?
By being a subscriber when the company is formed
Having shares transferred by an existing shareholder
What is a shareholders main role?
To provide the financial backing to the company
What is a PSC?
Directly or indirectly:
Hold more than 25% of the shares
Hold more than 25% of the voting rights
Hold the right to appoint or remove a majority of the directors
Has or exercises significant control over the company
What are the main rights of shareholders?
To vote on resolutions
To receive a dividend
What is the restriction on dividends?
Can only be made out of profits allocated for that purpose
What are preference shares?
Those that are paid a dividend over other shares
What is significant about preference shares?
They have a cumulative right
They receive a return of capital in priority in event of insolvency
Who decides on whether a dividend should be distributed?
The directors
What happens if a dividend is declared unlawfully?
The directors may be personally liable
What are preference only share votes reserved for?
Only those that affect their class rights
What is a derivative claim?
If a shareholder believes a director is about to breach a duty owed to the company and it appears the board will not assert the company’s rights to prevent or remedy the action, the shareholder may apply to court to bring a derivative claim against the director on behalf of the company
Who can bring a derivative claim?
Only a person to whom shares were legally transferred
Who can a derivative claim be brought against?
A director or another relevant person - includes shadow directors
Is it possible for a shareholder to bring a derivative claim for a breach before they were a shareholder?
Yes
When must a court dismiss a derivative claim?
When there is no prima facie case
What is the two step second stage for the court in derivative claims?
(1) is it satisfied a person acting to promote the best interests of the company would not seek to continue the claim or
(2) the action was authorised by the company or authorisation would be likely
What else does the court consider in considering a derivative claim?
Whether the shareholder is acting in good faith
The importance of the action in question for the success of the company
Whether the shareholder could seek a remedy in their own right
What happens if directors cannot / will not make a decision?
It will be up to the majority shareholders to pass an ordinary resolution to ratify the decision
or to bring a claim on behalf of the company
What rights do minority shareholders have?
Right not to be unfairly prejudiced
Apply to wind the company up
Right to inspect (service contracts of directors / register of members)
What is the remedy for unfair prejudice
The court will order that the minority’s shares are purchased
