Lawyers Leicester

If an outside investor takes shares in the company, would my rights be affected?

Potential concerns for existing shareholders in this situation include ;-

• If new shares are issued by the company this may reduce the percentage of the company which you own
• If the new investment results in changes to the company’s articles or shareholders’ agreement
• The new investor may want special voting rights that allow them to block or veto certain actions

Does a non-executive director have the same legal duties as an executive director?

In general, yes. In practice, you might not be required to show the same degree of care and skill as, for example, a qualified accountant who acts as the finance director. It would, however, be very dangerous to rely on this as a defence.

Can I prevent shares being sold to other investors?

In general, you can only prevent shares being sold to other investors if the company’s articles of association or any shareholders’ agreement  provide such rights, which can arise by  :-

• Rights of pre-emption – in simple terms if an existing investor wants to sell his, her or their shares must first be offered to other existing shareholders, generally in proportion to their shareholdings, before being sold to new investors.
• The articles of association may also include restrictions on the transfer of existing shares. The articles might, for example, give the directors the right to refuse to register the transfer of shares to another investor.

Can shareholders overrule directors?

Under company law, there are only a limited number of decisions which require shareholder approval. The company’s articles of association may give the shareholders further rights to take decisions. Otherwise, day to day decisions are made by the directors and cannot easily be overruled.

Shareholders with at least 5 per cent of the voting rights can require the company to call a shareholders’ general meeting, and to consider a resolution. This resolution could address a specific decision which the shareholders wish to overturn. Alternatively, the resolution could be aimed at replacing the existing board with new directors who are expected to take decisions with which the shareholders agree .

What is the procedure for calling a shareholder meeting ?

The company must send shareholders (and any auditors) a notice in writing, stating the date, place and time of the meeting, and setting out the rights of shareholders to appoint proxies. The notice period to be given is 14 days, although this may be increased by the articles of association. However, if the holders of shares representing 90 per cent of the nominal value of the company’s voting shares (or any higher percentage specified in the articles, to a maximum of 95 per cent) agree, the meeting can be held at shorter notice.

A director has requested a board meeting – do we have to hold one?

It depends on your articles of association but standard articles usually say that a director can call a board meeting, at any time, so you may wish to alter this