Minority shareholders generally have very few rights and can be subject to the decisions of the major shareholder who controls 50% or more of the shares in the company. The majority shareholder has almost total control of how the company is run and what it does.
Karen Edwards, Commercial Solicitor, says “It is always advisable that before joining a company as a minority shareholder, the shareholder insists on a Shareholders Agreement. The agreement would cover such things as the management of the company, the dividend policy for the company’s shareholders, what should happen in the event that the company is sold and perhaps most importantly, what decisions can only be made with the unanimous consent of all the shareholders, regardless of the size of their shareholding.” If all these things are in place a minority shareholder has some measure of control over the way the company runs its business. Without the consent of the majority shareholder, and in the absence of a Shareholders Agreement, the minority shareholder may be prevented from enforcing his share holding in the way that he would like.
Minority shareholders do have the right to see the company’s annual accounts, to be paid dividends if they are declared and to vote on certain decisions if these do, by law, require shareholder approval. There is some further protection in law for minority shareholders in that when the affairs of the company can be demonstrated to have been conducted by the majority shareholders in a manner unfairly prejudicial to the minority shareholders, application may be made to the Companies Court for an injunction and damages. However, this should be viewed as a last resort
For a free initial meeting please call 01202 499255 and Karen or a member of her team will be happy to discuss any questions you may have.