Page 28 - BOSS Today Issue 41

BOSS Today #41 DOWN TO BUSINESS – LEGAL

SMALL FISH,

BIG POND

e have many small and medium sized written resolution n The right to see financial data, the order
Wbusinesses among our members, and n Able to require the company to call a book and contracts
a lot of them have a long history. Many general meeting n Access to internal management
started out as sole traders or partnerships, n Able to prevent the deemed re- accounts
and then became incorporated as appointment of an auditor n The power to veto certain actions,
Limited Liability Companies. They may including a business sale or merger, or
be family businesses, passed down from Shareholding of 10% expenditure above certain limits
generation to generation, or have gone n Able to call a poll vote at a general
through management buy-outs or other meeting A Shareholder Agreement can
reorganisations. n Able to require an audit also contain an agreed process for
These developments will sometimes dealing with any disputes between
result in there being some minority Shareholding greater than 10% the shareholders, such as the use of a
shareholders, either where parents have n Able to block consent to short notice of a mediator, or even for the buy-out of the
retained shares to give themselves a general meeting minority shareholders’ shares, including
retirement income, or where several how the shares should be valued.
children and cousins have inherited a few Shareholding greater than 25%
shares in the business. Sometimes shares n Able to block a special resolution When Things Go Wrong
may be gifted to employees or directors n Able to block a compromise arrangement Unfortunately, sometimes minority
in the business as part of a remuneration with members or a class of members shareholders may need to take action to
package, or simply sold to provide some enforce their rights, and this can include
capital investment. Shareholding of 50% bringing claims to court:
The general principle is that a company n Able to block ordinary resolutions n Shareholders can present an Unfair
is managed by its directors (not by its Prejudice Petition
shareholders) and that the decisions of Although these Statutory Rights n Shareholders can bring claims against
the majority of shareholders reached in a are quite limited, it is possible for a the directors – known as Derivative
general meeting is binding on the minority. company to provide enhanced rights Claims
So, what rights do minority shareholders for minority shareholders, either by n If 75% of the shareholders agree, they
have in influencing how the business is making amendments to the Articles can petition the court for an Order
run? of Association of the company, or by to wind the company up – this is the
The Companies Act 2006 sets out some putting a Shareholders’ Agreement in most drastic of the actions open to
basic rights for minority shareholders place which gives more rights to minority shareholders.
depending on the size of the shareholding, shareholders.
as follows: When considering what additional rights For further information, please contact Nicola
Shareholding of 5% or more a minority shareholder may want, the Langley, Head of Legal & Commercial Solicitor, at
n Able to require the circulation of a most important provisions will include: nicola.langley@bpif.org.uk

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