What Can My Fellow Shareholders in the Business Do Without My Consent?

The rights and obligations of Shareholders will depend on a number of factors including; what has been agreed within any Shareholders agreement; whether the relationship is less formal and more likely to be considered a quasi-partnership by the court, and the type and percentage of shares owned/held by any Shareholder.

‘Shares’ are not all equal with one another. Shares can have voting versus non-voting rights, can be of different classes, and/or can be non-diluted or fully diluted. Issued share capital can change. The specific circumstances will therefore alter what can and cannot be done. 

As a general starting point if a Shareholder has a minority shareholding of less than 50% shares in a company, with those shares having voting rights, the following rights will apply:

• more than 25%: a Shareholder with more than 25% shares can prevent special resolutions being passed for example changes to the articles of association or the company name;
• 15% or more: can request the court prevent a variation to the rights of share classes;
• 10% or more: can require a vote at a general meeting of the company; and
• A Shareholder with 5% or more issued shares: can require the circulation of a proposed written resolution and a general meeting to be held to consider it.

With the above in mind minority Shareholders have significant rights and protections. A minority Shareholder of any shares can suffer from unfair prejudice from/caused by other Shareholders, and can pursue an unfair prejudice petition. 

Where a Shareholder owns 75% or more of the issued share capital in a company that will however mean that Shareholder is in a strong position – able to pass special resolutions. This is therefore an important level of ownership and control. 

A Shareholder of over 50% is able to pass ordinary resolutions for example resolutions; (a) authorising the Directors to allot shares; and (b) appoint and/or remove a Directors.

All Shareholders of a private limited company are entitled to inspect records of minutes of board meetings (the minutes) and copies of all Shareholders’ written resolutions. Shareholders at any level are also entitled to receive notice of general meetings and copies of the company’s report and accounts.

If other Shareholders are excluding you from management or decision making where you have such rights within a Shareholder agreement, articles of association or you have by informal agreement historically (and there has now been a change), you may have a claim for unfair prejudice.

Generally, decisions made by Shareholders are made by taking a vote. If the required majority is reached with the necessary quorum/percentage of Shareholders in a properly called meeting, the other Shareholders may not need your consent to pass resolutions and you may simply be outvoted.

Equally if you are suffering as a Shareholder as a result of decisions being made unfairly prejudicing you as a Shareholder specifically, that may be sufficient to establish an unfair prejudice petition.