The Rights and Remedies of Shareholder Flashcards
Which section of the Companies Act 2006 allows shareholders to enforce their membership rights under the Articles?
A. Section 260
B. Section 168
C. Section 994
D. Section 33
D. Section 33
Explanation: Section 33 CA 2006 treats the company’s Articles as a contract between the company and its shareholders in their capacity as shareholders, allowing them to enforce membership rights in court.
Which of the following rights is NOT typically enforceable under section 33 CA 2006?
A. Right to be appointed company solicitor
B. Right to a declared dividend
C. Right to vote at meetings
D. Right to receive notice of general meetings
A. Right to be appointed company solicitor
Explanation: In Eley v Positive Government Life Assurance, the court held that rights not connected with membership—like being appointed solicitor—cannot be enforced under s33.
What is the usual remedy for breach of membership rights under section 33 CA 2006?
A. Damages
B. Removal of directors
C. An Injunction
D. Derivative claim
A. Damages
Explanation: When membership rights under section 33 CA 2006 are breached, the usual remedy is damages, as the Articles form a contractual relationship enforceable in court.
What is a major advantage of a Shareholders’ Agreement over the Articles?
A. It can be amended by special resolution
B. It overrides statutory rights
C. It creates enforceable personal rights between shareholders
D. It applies to directors as well
C. It creates enforceable personal rights between shareholders
Explanation: Shareholders’ Agreements are private contracts between shareholders, giving them enforceable rights that go beyond what’s available under the Articles.
Which of the following is a correct use of a Shareholders’ Agreement?
A. To remove statutory duties from directors
B. To override the right to bring an unfair prejudice claim
C. To require unanimous consent to remove a director
D. To enforce company insolvency
C. To require unanimous consent to remove a director
Explanation: Shareholders may agree (among themselves) in a Shareholders’ Agreement to only remove a director with unanimous consent. While it cannot stop the statutory vote from happening, it gives contractual remedies if breached.
What shareholding is required to block a special resolution?
A. More than 25%
B. Exactly 50%
C. 10% or more
D. Less than 5%
A. More than 25%
Explanation: A special resolution requires 75% approval. Therefore, holding more than 25% allows a shareholder to block such a resolution.
Under the Companies Act 2006, how much of a shareholding is needed to demand a poll vote under the Model Articles?
A. 10%
B. 5%
C. 25%
D. 50%
A. 10%
Explanation: A shareholder (or group) with at least 10% of the voting shares can demand a poll vote under Model Article 44.
Which of the following rights is available to any shareholder, regardless of percentage held?
A. Block a special resolution
B. Commence a derivative action
C. Demand a poll vote
D. Require a general meeting
B. Commence a derivative action
Explanation: Any shareholder, regardless of their shareholding percentage, has the right to bring a derivative claim under s260 CA 2006.
If a Shareholders’ Agreement says all shareholders must agree before removing a director, but a majority proceed under s168 CA 2006, what happens?
A. The removal is invalid
B. The director remains in office
C. The resolution is void
D. The removal is valid, but a breach of contract has occurred
D. The removal is valid, but a breach of contract has occurred
Explanation: The company must act on a valid s168 CA 2006 resolution. However, if done in breach of a Shareholders’ Agreement, the breaching shareholders may be liable for breach of contract.
Which of the following statements best describes the difference between amending a company’s Articles and amending a Shareholders’ Agreement?
A. Both can be amended by a simple majority vote of shareholders.
B. The Articles require unanimous shareholder consent to amend, while the Shareholders’ Agreement can be amended by special resolution.
C. The Articles can be amended by a 75% majority vote; Shareholders’ Agreements require unanimous consent of all parties.
D. The Shareholders’ Agreement overrides the Articles in all circumstances and can be amended unilaterally.
C. The Articles can be amended by a 75% majority vote; Shareholders’ Agreements require unanimous consent of all parties.
Explanation:
Articles can be changed via a special resolution (75% vote). A Shareholders’ Agreement is a private contract, so changes require unanimous agreement from all signatories, giving minority shareholders a veto power.
Which of the following rights is available to shareholders holding 5% or more of the company’s shares?
A. The right to appoint a director directly.
B. The right to block an ordinary resolution.
C. The right to circulate written statements about proposed GM resolutions.
D. The right to inspect the company’s audit files.
C. The right to circulate written statements about proposed GM resolutions.
Explanation:
Under s314 CA 2006, shareholders with at least 5% of voting shares can require the circulation of written statements regarding resolutions for a general meeting. They also have other rights such as requiring a GM under s303.
Which of the following is true about the enforceability of a Shareholders’ Agreement?
A. The company can be bound by any term in the Shareholders’ Agreement, even those restricting statutory powers.
B. Shareholders’ Agreements are enforceable under s33 CA 2006.
C. Shareholders’ Agreements are private contracts and are enforceable only between the shareholders.
D. Shareholders’ Agreements replace the Articles of Association in law.
C. Shareholders’ Agreements are private contracts and are enforceable only between the shareholders.
Explanation:
A Shareholders’ Agreement is not governed by s33 CA 2006 and is enforceable under contract law. The company should not be a party to terms that restrict its statutory powers, such as those under s168 CA 2006.
