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Overview Of What Is A Shareholder

Shareholders own the company in which they have shares. They can also run them if they appoint themselves as Directors.

A Shareholder does not run a company day to day but can participate in voting on matters concerning the company’s constitution if their shares have voting rights.

However such matters are really controlled day to day by Directors who upon appointment control the company.

Distinction From Shareholders And Directors

A Shareholder’s key right is their ability as a group to remove and appoint Directors. Directors have a duty to run a company in the interests of the shareholders. Shareholders have the right to obtain financial performance information such as annual accounts. If Directors are not transparent then that is one of the key reasons for the Shareholders’ exercise of rights of removal of directors.

Therefore the relationship between Shareholder and Director is somewhat akin to Trustee and Beneficiary.

There can be different classes of Shareholders so some shareholders might be able to vote on company constitution matters and the removal or appointment of Directors. However, some shareholders may have no voting rights and merely hold shares to receive a return in the form of dividends. These are commonly called Preference Shareholders, being distinct from Ordinary Shareholders who will usually have voting rights in most SMEs.

Shareholders’ liability is limited (hence the term limited liability) to the unpaid call (price) on their shares.

Can Shareholders Remove Directors?

Yes Shareholders can remove Directors if they have lost confidence in them. Section 168 of the Companies Act 2006 enables this to happen.

Removal of Director

How To Remove A Director

In order for a Shareholder to remove a Director a Meeting of the company needs to be convened. If a Director does not act in accordance with the wishes of Shareholders then pursuant to Section 303 of the Companies Act 2006, the Shareholders can requisition a Meeting to pass a resolution to remove a Director.

Shareholders Requisition of Meeting

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Disclaimer: What Is A Shareholder?

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