BLAW211: Shareholders
What is a Share?
legal interest of shareholders in the company
Who is a Shareholder?
Person registered on the share register as the holder of shares
Rights of Shareholders
- Distribution
- Distribution of assetes on liquidation
- Attendance at meetings
- To sell your shares
Where rights of SH are outlined
- prescribed in a Constitution
- and between shareholders in a shareholders' agreement
Share Register
- every company must obtain one
- Evidence of legal owners of the shares
How to become a Shareholder
- by subscription on incorporation
- transmission on death or bankruptcy
- by transfer
Refusal to Register Transfer s84
- Board must within 30 days pass a resolution saying why reg was refused
- notice of resolution must be sent to transferor within 5 work days. Refusal must be bona fide. Restricted on transferring to minors or bankrupt persons
Nature of Shareholding
Number and Identity of Shareholders.
Liability either Limited or Unlimited
s169 Personal Action
Duties of shareholder include
- supervises share register
- disclose interests
- disclose share dealings
Duties not owed to Shareholders personally
- Mostly the directors duties
i.e s131, 133, 135 - 137, and 145
s177 Ratificiation
- allows ratification/approval by shareholders of powers exercised by a director/board of a power exercisable by others
- ratification: giving consent/signing contract or agreement
s165 Derivative Action
- Court can grant leave to a shareholder to bring proceedings in the name of the company, or to intervene in proceedings where the company is a party. Leave granted if company doesnt intend to bring or defend the proceedings, and doesnt want matter to be left directors or majority SH. Regard given to likelihood of succeeding, cost of likely return, any action already taken
s164 Injuction
shareholder may apply to court to stop company or director carrying out action which contravenes the Act or Finc Reporting Act 1993, or the Constitution
s170, 172
Shareholder may apply to court to require director or company to take action under the Act, Finc Reporting Act 1993 or the Constitution
s162, Indemnity and Insurance
- company may effect insurance for directors, or may indemnify directors.
- Requires constitutional sanction
- Indemnity: protection against loss
s174 Prejudiced Shareholders
Abuse or misuse of power. Acts where majority are endeavouring to appropriate to themeselves money, property or advantages which belong to the company. Lack of fair dealing. Being constrained to submit to unfair acts as a result of overbearing act or attitude of oppressor
s175 Certain Conduct deemed Prejudicial
- breach of s45 (premeptive rights)
- Breach of s117 (alteration of shareholder rights)
- breach s129 (major transactions)
Quasi Partnership
- companies that are based on trust and resepct
- expectation for all members to take part in management, and restrictions on transfer of shares to outsiders
- breakdown of relationship can be grounds to liquidate company
remedies under s174
- Order to acquire shares, compensation, regulating future conduct, altering constitution
- receivership, rectification of records, liquidation, setting aside action
Shareholder buy out rights
- altering consitution to impose/remove restriction on activties of the company, entering a MT
- undertaking amalgamation (combining)
- altering class rights attached minority SH shares
Buy-Out Procedure
- Minority Shareholder must given written notice to the company within 10 working days of the passing the resolution
- within 20 days, board must give written notice to SH of its decision: either agree to the purchase, arrange for someone to agree, apply to the court for an order exempting the company , rescind the resolution (cancel)
Application to Court
s114: Company can apply for exemption from purchase if: damaging to company, cant finance purchase, not fair to require company to purchase shares, it would cause them to fail the solvency test
Purchase by Company
- if company agrees to buy shares, must within 5 days, advise the shareholder of a fair price
- if shareholder considers price not fair, must give notice of objection to company. If they dont within 10 days, company must purchase at that price