Shareholders, meetings and resolutions
Shareholders own the company and control it through general meetings, passing ordinary resolutions by simple majority and special resolutions by a 75% majority.
Who shareholders are
A shareholder owns one or more shares in a company. A person becomes a shareholder by subscribing at incorporation, by allotment of new shares, by transfer from another shareholder, or by transmission on death or bankruptcy. Shareholders own the company but do not run it day to day: they elect the directors and make the biggest decisions by resolution at general meetings. In a limited company, a shareholder's liability is limited to any amount unpaid on his shares.
Rights of shareholders
| Right | Meaning |
|---|---|
| Vote | Vote at general meetings, usually one vote per share |
| Dividend | Share in profits when the board authorises a dividend after the solvency test is met |
| Information | Receive the annual report and financial statements; inspect certain records |
| Attend and speak | Attend general meetings and question the board at the AGM |
| Transfer | Sell or transfer shares, subject to the articles |
| Surplus on winding up | Share any assets left after creditors are paid |
| Court remedies | Apply to court for relief against oppression or mismanagement |
Meetings
| Meeting | Purpose |
|---|---|
| Annual general meeting (AGM) | Held once each calendar year: receive the annual report, elect directors, appoint auditors |
| Extraordinary general meeting (EGM) | Any other general meeting, called for urgent or special business |
| Board meeting | A meeting of directors to manage the business |
Resolutions
| Type | Majority needed | Typical use |
|---|---|---|
| Ordinary resolution | A simple majority of the votes of shareholders entitled to vote and voting | Electing or removing directors; appointing auditors |
| Special resolution | 75% of the votes of shareholders entitled to vote and voting | Adopting or changing the articles; approving a major transaction; voluntary winding up |
Directors and shareholders
At the AGM of a listed company such as Hayleys PLC, shareholders receive the annual report, elect directors and appoint the auditors. Changing the articles needs a special resolution, so shareholders holding more than a quarter of the votes cast can block the change.
Short answer: “Distinguish an ordinary resolution from a special resolution.” Ordinary: simple majority of votes cast (e.g. electing directors). Special: 75% of votes cast (e.g. changing the articles).
Structured question: “State the rights of a shareholder.” Vote, dividends when authorised, information, attend meetings, transfer shares, surplus on winding up, court remedies for oppression or mismanagement.
Ordinary = over half. Special = three in four (75%). AGM = once a calendar year.