Responsibilities of Shareholders in a Company – 4 main points

What are the Responsibilities of Shareholders

“This is in the Responsibilities of Shareholders that, They are the ones who provide the finances for the company. The sale of shares by the company to its shareholders is what enables the company to commence and continue in business. The shareholder will receive dividends from the company and benefit from the capital appreciation of the value of his shares”.

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What is Included?

  • What are the Responsibilities of Shareholders
  • Voting
  • General meeting
  • Winding up the company
  • Unfair prejudice

In Business Law Shareholders of limited companies have the advantage of not being liable for the company’s debts as a company is a legal person. The debts owed are the responsibility of the company and not the persons involved with it.

In the Responsibilities of Shareholders of a company with the model, articles are that They do have a right to direct their directors to do or refrain from taking actions by special resolution. They have a right to remove directors from office and the right to appoint new directors. This, however, needs to be done with caution as it involves considerations of company and employment law. They may also seek to restrain a breach of the director’s duties before the event or take action afterward if the directors exceed their powers under the company’s constitution.

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Shareholders have the right to vote at general meetings to exercise their powers and take decisions affecting the company. They can also send in a proxy as a stand-in to attend, speak and vote in their places. They can vote by a show of hands or a poll vote. Shareholders with at least 10% of the company’s shares have the right to demand a poll vote. Every shareholder has one vote if taken by a show of hands and each shareholder has one vote for every share he owns if taken by poll vote. This right will be exercised if a vote is first passed by a show of hands and produces an unfair result.

General meeting

Attending general meetings is one of the Responsibilities of Shareholders but must be given sufficient information in the notice of the general meeting to enable them to know what is supposed to be proposed. They must also be given proper notice of the general meeting as a failure to do that will make any business transactions at the meeting invalid. Proper notice is 14 clear days.  Shareholders of the company holding at least 5% of the company’s shares have the right to require the directors to call a general meeting of shareholders by depositing a written request at the company’s registered office. If the directors do not take action, then the shareholders themselves may call a general meeting.

Responsibilities of Shareholders
Responsibilities of Shareholders

Winding up the company

Shareholders can make an application for the company to be wound up on the ground that it is just and equitable. He will have to prove that the company is solvent, and he will be able to get back some or all the money that was originally invested. This is, however, the last resort because if successful, the company will cease to exist.

Unfair prejudice

Shareholders have the right to petition the court for a remedy if they feel that the company’s affairs are being conducted in an unfairly prejudicial manner. This can be to all members, some or just one. The complaint may be based on past, present, or anticipated future events. The shareholder must prove that he has been affected in his capacity as a shareholder. Some examples of unfair prejudice include non-payment of dividends, directors awarding themselves excessive remuneration, directors exercising their powers for an improper purpose, and exclusion from management in a small company so on. If the court finds that a shareholder has suffered unfair prejudice, it may make any order it thinks appropriate.

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