Rights and Remedies of Shareholders Flashcards
How do the Articles act as a contract, and who for? What provision?
S33 Company Act 2006 - they regulate the relationship between members and each other and between members and the company
What is the effect of the s33 provision between members?
Members can sue if their membership rights are infringed.
What is the remedy for a breach of s33 CA 2006?
Usually damages.
Are membership rights clearly established?
No, case law establishes most of these rights
What are 4 membership rights enforced under s33?
1) Right to a dividend
2) Right to share in surplus capital on winding up
3) Right to vote at meetings
4) Right to receive notice of GMs and AGMs
Can rights that are not S33 be enforced?
No
What is the example of the Solicitor Case in Eley?
Provision that plaintiff would be company solicitor in the Articles. Never appointed as Articles even though he became a member. Court held he could not sue under s33 as this was not a membership right.
What advice would you have given the solicitor in Eley or anyone else in his position?
Write out your rights in a separate contract, such as a Shareholders Agreement, and not in the Articles, as it likely will not be enforceable.
What type of provisions can be outlined in a Shareholders’ Agreement?
1) Unanimous voting over certain matters (e.g. removing a director)
2) Quorum for GMs
3) Dividend policy
4) Allotment of new shares, and
5) New and departing shareholders
Who is a Shareholder’s Agreement a contract between?
The shareholders
Do Articles deal with shareholders’ personal rights and obligations?
No, as it is a contract between the company and shareholders in their capacity as shareholders
When should shareholders not agree to an SA?
If it has provisions that restrict it from exercising its statutory powers
What is the difference between Articles and Shareholders Agreement?
- Articles: between company and shareholders, doesn’t concern personal rights
- Shareholders: between shareholders, can concern personal rights and obligations
Can Articles be enforced by one shareholder to another shareholder?
No
Who is a Shareholder Agreement enforced by and against who?
One shareholder to another shareholder
How is a Shareholder’s Agreement enforced?
In the usual way under general contract law principles
What remedies are available for Shareholder Agreement breach, typically?
Same as those for a breach of contract, in addition to an injunction to prevent breach of terms of an agreement
How can an injunction be used in a Shareholder’s Agreement?
To prevent a breach of a term by another shareholder that is party to the agreement
What happens if an Agreement is breached and the Shareholder’s vote for something they shouldn’t have? I.e. Removal of Director?
The Company is not bound by the Shareholder’s Agreement.
Although the Company is not bound by Shareholder’s Agreement, what will happen in the event of a breach?
The Shareholder / Director can bring a claim against shareholders for the breach in the Law of Contract.
What rights does a shareholder with 5% or more have?
- Require directors to call GM
- Require circulation of written statements regarding proposed resolutions to be considered at GM
- Circulate a written resolution
What rights does a shareholder with 10% more have?
Demand a poll vote
What rights does a shareholder with over 25% have?
Block a special resolution
What rights does a shareholder with over 50% have?
Pass or block ordinary resolution
What rights does a shareholder with 75% or more have?
Pass a special resolution
