Shareholders/Members Flashcards
How does a person become a member of a company?
A person becomes a member when their name is added to the Register of Members, and the company issues a share certificate to the member.
What must be kept up to date and is an internal register?
The Register of Members must be kept up to date and is an internal register.
What is a PSC (Person with Significant Control)?
A PSC holds more than 25% of shares or voting rights, or has control over the appointment of the board of directors. PSCs must be added to the PSC Register.
What is the procedure for declaring dividends?
Directors recommend the dividend in a resolution, shareholders vote to approve it, and they can decrease the amount recommended. Directors can be liable if they approve an amount larger than available profits.
What are ordinary shares?
Ordinary shares provide equal rights to voting, dividends, and on dissolution of the company.
What are preference shares?
Preference shares have superior rights compared to ordinary shares, including dividend preferences. They can be cumulative or non-cumulative.
What is the difference between cumulative and non-cumulative dividends?
Cumulative dividends roll over to the next year if not paid, while non-cumulative dividends disappear if not paid out in that year.
How does voting power correlate with the number of shares?
The more shares a member holds, the more voting power they have.
What is a Derivative Action?
A Derivative Action is when a shareholder brings a claim if a director breaches their duty and the board won’t act. It must show a prima facie case and promote the company’s best interests.
What must be shown for a Derivative Action claim to proceed?
The claim must show a prima facie case (not frivolous or vexatious) and must promote the company’s best interests.
What remedy is usually available for unfair prejudice?
The usual remedy is to force the majority shareholders to buy the minority shareholders’ shares at fair value or to negotiate with the directors and majority shareholders.
When can a shareholder apply to court for winding-up?
A shareholder can apply to court for winding-up if the company is solvent and it is just and equitable to do so, such as in a management deadlock.
How long must a company keep a director’s service contract?
A company must keep the director’s service contract at the registered office for at least one year after the director leaves.
What rights does a shareholder have regarding the Register of Members?
Shareholders have the right to inspect the Register of Members, which must be kept at the registered office. The shareholder must have a proper purpose for the request, and the company must comply within 5 working days.
