Understanding shareholder rights

This requires looking at the company’s legal infrastructure – such as shareholder agreements and updated articles of association – as well as what reactive mechanisms can be initiated if your rights are breached.

Our Corporate specialist lawyers, led by Partner Marina MacLennan, can provide all the advice you need on this area of the law as well as ensuring compliance with the Companies Act 2006 when it comes to voting, dividends and information access.

Why is understanding the rights that attach to your shares crucial?

This is key to identifying what you can do and how much influence you can exert.

Whilst all shareholders have some rights, these vary significantly and you are not guaranteed the right to see board meeting minutes, copies of shareholders’ written resolutions, company reports and accounts and to be given notice of general meetings.

The higher the percentage of shares that you hold, the more likely you are to have a controlling interest and be able to shape the company’s direction – however it all depends on the rights that attach to the shares you hold.

How do you improve and enforce your rights as a shareholder?

Bolstering and improving shareholder rights, particularly for minority shareholders, can be done by enhanced protections under the articles of association or via the shareholder agreement, or both.

This can include looking at:

• Dividend rights – taking steps to prevent directors rewarding themselves and deliberately not paying dividends.
• Dispute resolution – ensuring there is a mechanism which ensures a fair process including mediation.
• Valuing shares on exit – known as tag along rights, potentially a way to ensure your shares are fairly valued if there is a buyout.
• Improved access to information – staying in the picture about financial health and performance.

Get in touch

Partner Marina MacLennan, head of Wards Solicitors’ Corporate Commercial Team can provide all the advice you need on share rights.

If a dispute does arise, our specialist Business Disputes Team – all experienced, commercial negotiators – will work with Marina and you to achieve a practical, business-focused solution to whatever issues arise, whether that means going through formal Court and arbitration proceedings or employing alternative dispute resolution techniques.