What do company shareholders do?

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Preparing to set up a new limited by shares company, and I’ve got several concerned friends on my hands. I wanted to name three former colleagues as shareholders in my new limited company, because they have all provided either some crucial financial or logistical support to this project. I’ve told them that, and they were chuffed, but they were also a bit wary of the sort of role they will need to play in my company as shareholders. This got me thinking: I have no clue what a shareholder even does. Can someone help me out with this so I know what to tell my colleagues?

Answers

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A shareholder owns all or part of a company, depending on how many shareholders your company has. The role of a shareholder is quite hands-off because directors are responsible for running the operational side of the business. In many companies, however, shareholders are also directors but they do not have to be. The only time shareholders need to make decisions is when the directors are not authorised to do so.

The main duties and responsibilities of a shareholder are:

  • Owning one or more issued shares in a the company
  • Paying the nominal value (usually £1/per share) of their shares at the request of the company, either at the time of their appointment or at a later date when the company requires this money to pay its creditors. The value of their shares is the limit of their liability.
  • Casting a vote on on important business decisions, such as: appointing and removing directors; altering directors’ responsibilities or powers; issuing more shares; changing the company name; altering the rights attached to each share.

As the beneficial owner of part of a company, each shareholder is usually entitled to receive a distribution of any profits made by the business. They will receive dividend payments in relation to the percentage of ownership represented by their shares. For example, if a shareholder owns 1 of 4 issued shares, he or she is entitled to 25% of company profits.

a year ago
 

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