Shareholder rights

[Jay Em]

Hi all. Looking for advice please. I was a director and 30% shareholder in a company. Five years ago I relocated overseas with the other two partners claiming they were unable to buy my shares, but promised that any dividends due would be forwarded to me. No contact was ever made. I noted in 2014 that i was terminated as a director without my knowledge. Firstly, is this legal?
Now one of the directors recently passed away, and I have received a call from the other partner saying that an advisor handling the deceased affairs will be issuing more shares in the company to effectively dilute my share. He is offering a small amount to purchase my shares or saying I will receive nothing once this action is taken. So secondly, is there anything I can do to secure a fair price for my shares or stop this from happening? Thanks

 

[Supercoach]

They cannot terminate your directorship without going through a specific process and it is not valid unless you were informed.
There are certain protections available to stop the dilution so your first stop is to look at the Mem & Arts and see what they say regarding issuing of shares.
Your next action should be to ascertain what the company accounts say, how profitable etc. because if there is enough value there you should instruct a solicitor or speak to the Resolver or other resource that can be found on the forum.

 

[The Byre]

Do you have a shareholders' agreement or founding articles?

 

[Chris Ashdown]

As a shareholder you can insist that they offer any new shares at a ratio based upon the percentage shares issued to each shareholder, so you can buy your extra shares to retain your 30%

Inform Companies house that your removal as a director was made without you resignation and you wish to be reinstated asap

Check if the company is worth anything but looking up its last few accounts

Talk to either resolver of a commercial solicitor

 

[Supercoach]

From the Institute of Directors:

The Statutory Procedure for Removing a Director

The statutory provision allowing any director to be removed from office by ordinary resolution is in Section 168 of the Companies Act 2006 (s.168 CA06). The resolution must be proposed at a formal shareholders meeting. The following is a summary of the procedure.

1.Special notice of the resolution is required (s.168 CA06). This means that the shareholder(s) intending to propose the resolution must give written notice to the company at least 28 days before the meeting at which the resolution will be proposed (s.312 CA06). If this is not done, or not done correctly, the resolution will be ineffective even if it is validly passed at a properly convened meeting.

2.On receipt of such notice, the company must immediately send a copy to the director concerned (s.169 CA06).

3.The director concerned is entitled to make written representations to the company (not exceeding reasonable length) and to require their circulation to the shareholders, subject to certain safeguards. If the representations are received too late for circulation, or the company fails to circulate them, the director may require that they be read out at the meeting. He/she is also entitled to attend the meeting and speak on the resolution, even if he/she is not a shareholder (s.169 CA06).

4.The company must give all shareholders notice of any such resolution at the same time and manner as it gives notice of the meeting or, if that is not practicable, by newspaper advertisement or other means allowed by the Articles, at least 14 days before the meeting (s.312 CA06).

5.The meeting should be convened and conducted formally, in compliance with all statutory requirements relating to meetings of shareholders and the applicable provisions of the company’s Articles (including quorum and voting), otherwise the resolution may not be valid.

 

[Chris Ashdown]

50+ % Shareholding - List of Rights
(includes all listed below)
Shareholder Rights
Pass Ordinary Resolution

An ordinary resolution is not defined by Companies Act 2006 but is one passed by a simple majority (i.e 50.01%) of the votes cast by the members entitled to vote and present personally or by proxy at the meeting.

Where CA 2006 or the articles do not specify the resolution required an ordinary resolution will suffice and satisfies a requirement of CA 2006 for a resolution of the company or a decision of the company in general meeting.

Decisions which may be made by ordinary resolution, include:

Any Restrictions
Statutory Position (CA 06)
(a) any item of routine business where CA 1982006 requires approval of the matter by members in general meeting;

(b) exercising authority to alter (but not reduce) the authorised share capital;
CA 2006, ss 617 & 618

(c) provide or renew the directors' authority to allot relevant securities;
CA 2006, s 551(8)

(d) payment of a final dividend;

(e) capitalisation of reserves;

(f) approval of transactions between the Company and "connected" persons;
CA 2006, s 190

(g) removal of a director (providing special notice of the resolution has been given).
CA 2006, s 168

Ordinary Resolution With Special Notice

Special notice of the intention to propose certain ordinary resolutions must be given to the company.
These resolutions requiring special notice include those proposing:

(1) The removal of a director
CA 2006, s 168(2)

(2) The appointment as auditor of a person other than the retiring auditor
CA 2006, ss 510-513

(3) The removal of an auditor before the expiration of his term of office
CA 2006, ss 510-513

25+ % Shareholding - List of Rights
Shareholder Rights
Block Special Resolution
Any Restrictions

Statutory Position (CA 06)
CA 2006, s 283

10% Shareholding - List of Rights
Shareholder Rights
The right to have the Company's Annual Accounts audited
Any Restrictions

Statutory Position (CA 06)
CA 2006, s 476

5+ % Shareholding - List of Rights
Shareholder Rights
The right to refuse to consent to short notice

Any Restrictions
Any request must be given to the company in writing at least one week before the General Meeting to which the statement relates.

Statutory Position (CA 06)
CA 2006, s 307(5) & (6)

The right to circulate a written statement
CA 2006, s 314

The right to call a General Meeting
CA 2006 s 303

Any % Shareholding - List of Rights
Shareholder Rights
The right to ask the court to call a General Meeting
Any Restrictions

Statutory Position (CA 06)
CA 2006, s 306

The right not to be unfairly prejudiced
CA 2006, s 994

The right to have the company wound up provided that it is just and equitable to do so

The right to vote
CA 2006, s 284

The right to receive notice of general meetings
CA 2006, s 310

The right to a dividend if one is declared

Directors have power (but are not obliged to) declare a dividend. Members cannot vote to pay themselves more than the directors have recommended.

Model Articles, Article 30

The right to a share certificate

This right Depends on the Articles of the company. See the section of this site entitled "selling your shareholding".
CA 2006, s 769

A members right to have his name entered on the Register of Members
CA 2006, s 113

The right to a copy of the Annual Accounts
CA 2006, s 431

The right to an AGM
ONLY IF IN ARTICLES

The right to inspect Minutes of General Meetings
CA 2006, ss 248, 355 & 358

The right to vote

The right to inspect the register of members and index of members' names without charge
CA 2006, s 116(1)(a)

The right to require a copy of the register of shareholders within 10 days of the request subject to a charge
CA 2006, s 116(2)

The right to inspect the register of directors service contracts without charge
CA 2006, s 229(1)

Registers to be maintained at a Company's Registered Office

Register of Directors and Secretaries
CA 2006, s 162 & 275 to record the information required by CA 2006, ss 163 & 277

Register of Members
cA 2006, s 113


Register of Directors' Interests in Shares



CA 2006, s 808


Register of Charges, together with copies of all instruments Containing registration with the Registrar under CA 1985, s295

 

[Jay Em]

Thanks all. Have the articles and agreement. Will consult with a solicitor.