Shareholders

Shareholders

Shareholders play two vital roles. Firstly, they contribute capital to a company. Secondly, they exercise important decision-making power. 

Members & Shareholders

There is a distinction between members and shareholders. In a company that does not have a share capital, there are only members and no shareholders. 

A shareholder in a company that does have a share capital does not automatically become a member. To become a member, the person must agree, and their name must be placed on the register of members (section 112 CA 2006). 

Resolutions

The general power to manage the company is vested in the directors (Mutual Life Insurance v Rank Organisation). 

Despite this, the Insolvency Act 1986 and the CA 2006 place considerable decision-making power in the hands of the members, such as: 

1. The alteration of the company's articles.

2. The conversion of a company to private to public, or limited to unlimited, can only be approved by the members. 

3. The members can remove a director(s) from office (section 168 CA 2006).

4. Numerous loans and other transactions can only be approved by members. 

5. Petition to the court for winding up of the company. 

The company's members will usually make such decisions via the passing of a resolution. A resolution is simply a more formal word for a vote. 

Types of Resolution

There are two types of resolution: 

1. Ordinary (section 282(1)). This is passed by a simple majority - over 50%. 

2. Special (section 283(1)). This is passed by a majority of not less than 75%. Special resolutions are reserved for important decisions and constitutional changes. 

Where statute requires that an ordinary/special resolution is required, the articles of association cannot alter this. 

The resolutions of public companies must be passed at a meeting of members (281(2)). 

The resolutions of private companies can be passed at a meeting, or through a written resolution (281(1)). 

Written Resolutions

CA 2006 allows private companies to pass written resolutions as a substitute for a resolution passed at a meeting (except where the resolution seeks to remove a director or auditor). 

Written resolutions require the same majorities, and have the same force, as resolutions passed at meetings (288(5)). 

When a written resolution is proposed, a copy of the proposed resolution will be sent to each member along with a statement informing the member how to signify agreement and when agreement must be made by. Photocopying the resolution and posting it to the members is clearly a much quicker and cheaper option than convening a meeting ('think small first' behind the CA 2006). Once a member has signified agreement, this cannot be revoked. 

Meetings

There are two types: 

1. General meetings - all members are entitled to attend. The Annual General Meeting constitutes a general meeting. 

2. Meetings which only certain class members are entitled to attend. These meetings are known as 'class meetings'. These are reserved for determining the rights of members with special rights known as class rights. 

Resolutions of public companies must…