chapter  5
16 Pages

Shareholders and their Rights

The other issues, the nature of rights of shareholders and their enforcement, can arise in many contexts. Such matters have already formed part of questions in previous chapters, for example when considering corporate capacity and the division of powers within a company, and will arise in later chapters, for example when appraising rights to dividends and the variation of class rights. In this chapter, it is the ability of shareholders (generally a minority shareholder) to do something either when dissatisfied with corporate management or when generally unhappy with the way the company is operating, which may involve the board and/or the majority shareholder, or when unable to co-exist happily with their fellow shareholders. A majority shareholder is able to dismiss the board (s 168 of the Companies Act (CA) 2006) and may be able to give the board instructions on how the company is to be run (art 4 of the Model Articles (2008)) or even change the articles (s 21 CA 2006), and so has less need, but may still wish, to use the remedies discussed in this chapter. Since it is the company that generally has the sole right to challenge the actions of the board, any question which demands advice for a shareholder is necessarily asking you to consider not merely the cause of action open to a shareholder, but also how, if at all, the shareholder can enforce his rights (a locus question, which issue also played a prominent role in Chapter 4).