FAQs about Company/Business Law

How can I call a shareholder meeting?

To call a shareholder meeting, you must send a notice in writing to the shareholders stating where and when the meeting is to be held and the rights of the shareholders to appoint someone else to appear at the meeting.  You must give 14 days of notice, although this may increase dependent on the articles of association, although if the shareholders holding 90% of the value of the company agree, meetings may be held at shorter notice.

The director has requested a board meeting.  Are we obligated to have one?

Standard articles of association will usually state that a director can call a board meeting, although (rarely) there will be instances where the articles of association do not state anything.

Are partners equal in a partnership?

If there is no partnership agreement, all the partners will be treated equally by the law.

How does the proportion of shares held affect rights?

Generally speaking, the more shares held the more rights a shareholder has.  If 75% of shares are held, the shareholder has the right to force through resolutions, including special resolutions, at general meetings.  If 50% of shares are held, the shareholder has the right to pass an ordinary resolution at a general meeting. If 25% of shares are held, the shareholder has the right to block a special resolution.  Ownership of 5% of shares entitles a shareholder to call a general meeting.

How are minority shareholders protected from unfair prejudice?

Directors of companies are under a general duty to treat all shareholders fairly.  However, this is not so straightforward where there are other shareholders with significant proportions of shares and thus powers to influence board decisions.  Proving that these decisions are unfairly prejudicial is difficult and potentially costly, making properly drafted shareholder agreements vital.

Can I stop shares being solder to other investors?

You can stop shares being sold to other investors if the articles of association or shareholder agreement allows for this.  Generally, you might expect to have a right of pre-emption, which obligates shareholders who want to sell their shares to offer the shares to other shareholders in proportion to the percentage of shares they hold.  Articles of association may also make provisions for restricting the transfer of shares.

Can shareholders overrule the decisions of directors?

Under company law, directors are empowered to make a wide range of decisions without approval of shareholders, making decisions difficult to overrule unless the particular articles of association allow the shareholders to make decisions of their own.  However, shareholders with a greater than 5% holding can call general meetings so resolutions regarding director decisions or even replacement of the directors can be considered and voted on.

Are shareholder agreements strictly necessary?

Legally speaking, shareholder agreements are not strictly necessary, although as has been shown in the above questions, it is a good idea to have one.  Shareholder agreements can also act as a guide to the overall strategy of the company and can make provisions for circumstances where a shareholder wishes to sell his shares, dies or retires.

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