Minority shareholders own less than 50% of shares in a company. This means they lack the power to control company decisions. But, they may be able to influence the direction of the company, and in some cases can block decisions.
What rights do minority shareholders have?
- Right to Vote
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- Minority shareholders have the right to vote on company matters at meetings, with voting power proportional to their shareholding.
- Single minority shareholders can band together to influence decisions, especially when it comes to blocking special resolutions which require a higher threshold (e.g. changing the company’s articles of association.)
- Right to Information
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- Minority shareholders have the right to access company information, such as annual accounts, reports and meeting records, although there may be some limitations.
- Right to Dividends
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- Minority shareholders have the right to receive dividends if the company distributes them, and if the company has profits and cashflow to do so.
- Blocking Rights
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- Minority shareholders can block specific actions of the majority shareholders, depending on the size of their shareholding. For example:
- A minority shareholder with a shareholding of 25% or more, can block special resolutions
- A minority shareholder with a shareholding of 5% or more, can require the circulation of a written resolution.
- Minority shareholders can block specific actions of the majority shareholders, depending on the size of their shareholding. For example:
- Rights to Petition the Court
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- Minority shareholders can petition the court for relief from “unfairly prejudicial conduct” under the Companies Act 2006, Section 994. This might cover excessive Director renumeration to the detriment of shareholders, failure to pay dividends, breach of the Articles of Association and many other issues.
The most common way of protecting a minority shareholder and clarifying what rights and information they might have access to is to create a shareholder agreement. The Companies Act 2006 does not ensure, for instance, that a minority shareholder should be allowed access to management accounts. And if you’re a minority shareholder, that might be exactly the information you might be keen on viewing.
Our corporate team can advise on, and prepare, the most appropriate shareholders agreement for you. At AWB Charlesworth Solicitors we have extensive experience in business law, for large businesses as well as start-ups.
If you need legal advice at any stage, contact Umberto Vietri on 01274 352056 or email umberto.vietri@awbclaw.co.uk.
28 March 2025
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