What rights do shareholders have?

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I am one of six shareholders in a small energy co-op, and we aren’t all in agreement on the way things are headed. As a shareholder, could someone please spell out exactly what my rights are? As a part-owner in the company, I feel entitled to have my voice heard - but I don’t want to overstep my legal boundaries.

Thanks,

Answers

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Shareholders’ rights are defined in the ‘prescribed particulars’ attached to their shares. These rights must be included in the statement of capital during the company formation process.

Most companies issue only ordinary shares, thus providing equal rights to each shareholder. The prescribed particulars of rights attached to each ordinary share are defined in the Companies (Shares and Share Capital) Order 2009) and must be included in the articles of association. They are as follows:

  • The right to cast one vote per share in any circumstances
  • The right to dividend distributions (i.e. profit entitlement)
  • The right to participate in a return of capital (including on the winding up of the company)

As these shares carry equal rights, the amount of control you have as a shareholder has will depend on the percentage of ownership represented by your shareholdings. Those with a higher percentage of shares will have more control and receive a larger chunk of the profits. You may also create different types of shares to provide different rights to certain shareholders.

Shareholders must be in agreement of their rights and it is advisable to draw up a Shareholders’ Agreement as clarification. This is an effective way to avoid confusion and unnecessary disagreement further down the line.

a year ago
 

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