Rights of Shareholders and responsibilities
The vast majority of companies in Ireland are run by two or a small number of shareholders.
Very often the businesses continue without any incident or disagreement but from time to time issues arise within a Company which causes shareholders to check their rights.
The rights for shareholders are enshrined in:
- Company Law i.e. the 2014 Companies Act
- The Company’s Constitution i.e. their rules
- A Shareholders’ Agreement – a private agreement between the shareholders
In general, the main shareholder rights can be summarised as follows:
- The right to vote
All shareholders have equal voting rights unless there are specific classes of shares created which give certain shareholders more greater voting rights than others.
- The right to reserve copies of financial information – this is usually in the form of the financial statements of a company at an AGM.
- Pre-emption Rights – i.e. the right to be given the opportunity to purchase new shares in the same proportion as the existing shareholders based on their existing shareholding.
- The right to seek to have the Company wound up.
A disgruntled shareholder who believes that the Company is not operated in a fair manner also has rights. In those circumstances a disgruntled shareholder can bring an application to Court to have the Company sold or to wind up the Company on just and equitable grounds. In order to succeed in such an application, the aggrieved shareholder must prove that the act/conduct complained of is designed to advance the interests of the majority shareholders i.e. mere dissent is not enough.
A very interesting recent case in the area of shareholder oppression was Mascarenhas -v- Karim where the Court of Appeal upheld the High Court in making a finding of oppression. What is interesting about this case is that the person against whom the aggrieved shareholder complained was not in fact a director or Shareholder but a spouse of an existing shareholder/director. The Court also made an interesting Order by giving the oppressed shareholder the right to buy out the shares of the majority. This is very often not a practical option for reasons of the unaffordability for a minority shareholder to buy out the majority shareholder’s shares.
This firm acted in a seminal shareholder oppression case a number of years ago in the case of Vantage Resources -v- Hamill where we successfully defended a claim by a minority shareholder that he had been oppressed.
For further advice on this or any issue relating to Shareholder disputes or Company Law matter please contact Brendan Dillon on 01-2960666.