shareholders

becoming a SH

first 2 people who sign memorandum of association as subscribers automatically become first shareholders of company. must be entered on companies register of members

once company running, 2 ways to become new SH

  1. new SH could obtain shares from existing shareholder by...

buying some of their shares

receiving some of their shares as gift

transmission of shares when they die/bankrupt and electing to become SH rather than transferring them to 3rd party

2. company may allot new shares

register of members

every company needs a reg/ keep info on central reg at CH

  1. company must register transfer of shares within 2 months of being lodged with compant
  1. when allotting new shares, must enter new SH on register of members or reflect increase in number of their shares

if 1 member company, need statement highlighting this on reg

where reg at reg office/ SAIL, must be availbale for inspection to SH free of charge

all SH have right to have name of register of members

share certificate

all SH have right to receive cert- primae facie evidence of their title to shares.

cert must be issued within 2 months of allotment/transfer of shares

PSC register

all private companies and non-traded public companies must keep reg of persons with signficant control (PSC register)

SH who owns more than 25% of shares or controls more than 25% of voting rights must be on reg

includes individual SH and those that are 'relevant legal entities'

need reg even if no SH with sig control/ entered on

forms to be completed and sent to CH:

  • PSC01- individual first time
  • PSC02- rel legal entity first time
  • PSC04- DH on reg but details change
  • PSC05- rel legal entity on reg but details change
  • PSC07- anyone ceasing to be person with sig control

deadline= 14 days from date company made change

director can apply to have res address & name private- reg only show how many shares they have

shareholders rights

articles of association

SH have remedy for breach of contract if SH or company do not abide by terms of consittution (statutory contract between both)

breach = where DH rights infringed e.g. voting rights and rifht to share in profits via dividends

shareholders agreements

a private contract between the shareholders of a company that outlines the rights, responsibilities, and obligations of the shareholders . It supplements the company’s articles of association

only binds those SH in it

bind every SH present and future

matters in them:

  • restrictions on transferring shares
    - Bushell v Faith clauses- give Sh weighted voting rights when resolution is to remove that SH from office as director
    - non-compete clause- SH cannot be involved in business which competes with company

SH can only take action under articles where it relates directly to their rights as a member

but cannot restrict SH from voting in part way in board meetings if also a director- breach directors duties

voting rights

right to send proxy to GM

right to poll vote

right to receive notice of GMs

right to requisition GM

right to apply to court to call GM (where other SH refuse to attend and not possible to holdin quorate meeting)

right for SH with 5% or more of voting rights to requre circulation of written statement 1k word

right for SH with 5% or more of shares to require company to circ writtenres and accompanying statement

other rights

right to receive dividends

right to apply to court for company to be wound up

right to remove director by ordinary res

right to remove auditor by ordinary res

right to inspect without charge

  • GM and SH res minutes
  • statutory registers
  • directors service contracts and indemnities
  • contracts relating to companys purchase of own shares

right to receive copy of annual accounts and reports

right to seek injunction to restrain company from doing prohibited act against its const

types of shareholders

corporate SH

single-member companies

public companies

joint shareholders

person authorised to act as its rep at company meeting

groups of companies

where companies own shares in the other companies

subsidary= where one company has shares in another company.



PARENT/HOLDING= Company A


SUBSIDARY= Company B & C

A owns majority of voting rights in B;


A is member of Company B, has right to appoint/remove maj or board of directors; or


A member of Company B and controls alone the maj of voting rights in it; or


B is subsidiary of company C which is itself a subsidiary of A


Company 'wholly-owned subsidary' of another company - if all of its shares are owned by another company (parent) or by that company's wholly-owned subsidiaries e.g. If Company A owns 100% of the shares in Company B, and Company B has no other members (shareholders), then Company B is a wholly-owned subsidiary of Company A. Similarly, if Company B owns 100% of the shares in Company C, and no other members exist, Company C is also a wholly-owned subsidiary of Company A (through Company B).

means if 1 company insolvent and wound up, other companies can still operate.

individual both sole director and shareholder

types of share

ordinary

companies formed with these only

give SH right to attend & vote at GM

entitled to receive dividends

preference shares

enhanced rights over ordinary SH

wish to invest in company- forego rights for greater financial returns

cumulative/non-cumulative

cumulative

right ranks before payment to ordinary SH in current financial year

non-cumulative

no preference to be paid before ordinary- if dividend not paid in part year, SH loses right to thatt years dividend and does not have right to receive in future

participating

further right to receive profits/assets in addition to other pref share rights

preference SH has to be paid any missed dividends from previous financial years and current years

protecting minority shareholders

unfair prejudice petitions

grounds

companys affairs conducted in manner that is unfairly prejudicial to the interests of the members, generally, or some part of its members (c)

click to edit

actual/proposed omission of company would be prejudicial

conduct must cause harm to one or more SH and be unfair

diverting opportunties to competitn business whihc maj SH holds interest

excessive pay to directors

excluding SH from management of company where on incorp neg thought would

auditor removed by SH on ground of divergence of opinion is UP

court make order that other SH must buy back shares of UP SH or for company to buy them back (SH will want to cut ties)

derivative claims

claim instigated by SH for wrongdoing to company arising from actual/proposed act/omission of director

point is for SH to instigate legal action instead of board of directors as board neglecting to bring claim/ refusing to

involving negligence, bod, breach of trust by director

court has part reagard for evidence fo SH with no personal interest in matter- objective

SH can bring a derivative claim on behalf of the company, but she would need the permission of the court to continue the claim,

court will refuse where majority of Ds in BM would ratify the breach