Members

Question 1

What are shareholders also known as?

Answer 1

Members

Question 2

How does one become a shareholder?

Answer 2

By being a subscriber when the company is formed

Having shares transferred by an existing shareholder

Question 3

What is a shareholders main role?

Answer 3

To provide the financial backing to the company

Question 4

What is a PSC?

Answer 4

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

Question 5

What are the main rights of shareholders?

Answer 5

To vote on resolutions

To receive a dividend

Question 6

What is the restriction on dividends?

Answer 6

Can only be made out of profits allocated for that purpose

Question 7

What are preference shares?

Answer 7

Those that are paid a dividend over other shares

Question 8

What is significant about preference shares?

Answer 8

They have a cumulative right

They receive a return of capital in priority in event of insolvency

Question 9

Who decides on whether a dividend should be distributed?

Answer 9

The directors

Question 10

What happens if a dividend is declared unlawfully?

Answer 10

The directors may be personally liable

Question 11

What are preference only share votes reserved for?

Answer 11

Only those that affect their class rights

Question 12

What is a derivative claim?

Answer 12

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

Question 13

Who can bring a derivative claim?

Answer 13

Only a person to whom shares were legally transferred

Question 14

Who can a derivative claim be brought against?

Answer 14

A director or another relevant person - includes shadow directors

Question 15

Is it possible for a shareholder to bring a derivative claim for a breach before they were a shareholder?

Answer 15

Yes

Question 16

When must a court dismiss a derivative claim?

Answer 16

When there is no prima facie case

Question 17

What is the two step second stage for the court in derivative claims?

Answer 17

(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

Question 18

What else does the court consider in considering a derivative claim?

Answer 18

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

Question 19

What happens if directors cannot / will not make a decision?

Answer 19

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

Question 20

What rights do minority shareholders have?

Answer 20

Right not to be unfairly prejudiced

Apply to wind the company up

Right to inspect (service contracts of directors / register of members)

Question 21

What is the remedy for unfair prejudice

Answer 21

The court will order that the minority’s shares are purchased