What are my shareholder rights?

Shareholders are the owners of a UK limited company and hold specific rights relating to voting, dividends, and capital. These rights vary depending on the number and class of shares held, as well as the provisions of the Companies Act 2006, the company’s articles of association, and any shareholders’ agreement in place.

But what does that actually give a shareholder in practice?

The answer depends on how many shares they hold and what type of shares they are. Someone with a small stake has very different rights from someone with a large holding, and different share classes can change rights and entitlements.

This guide explains the main shareholder rights under the Companies Act 2006 and how they work in the real world.

What are shareholder rights in a UK limited company?

Shareholder rights are the legal entitlements that come with owning shares in a limited company. These rights are set out in the Companies Act 2006, your company’s articles of association, and any shareholders’ agreement in place.

• Dividends – do all shareholders get them?
• Do shareholders need to pay for their shares?
• Adding and removing company shareholders

In many small and growing companies, the same people are both shareholders and directors. However, the rights covered here arise from share ownership, not from holding a director role.

Do all shareholders have the same rights?

A shareholder’s rights depend mainly on two things: the percentage of the company they own and the class of shares they hold. A shareholder with 5% of the shares will usually have far less influence than one with 75%, even if they hold the same class of shares.

On top of that, different share classes carry different rights. Non-voting shares, preference shares and alphabet shares can change how much control a shareholder has, how dividends are paid, and what they receive if the company is sold or wound up.

For example, some preference shares give their holders priority when company assets are distributed.

What rights do shareholders have?

A shareholder with any amount of ordinary shares has the following rights:

1. Receive a share certificate

Every shareholder in a company should receive a share certificate no later than 2 months after agreeing to take shares. This applies whether they acquire them following an allotment of new shares or a transfer of existing shares.

A share certificate is like a receipt, serving as proof of ownership. However, under UK company law, the shareholder is not the legal owner of the shares until the company records their details in its register of members.

2. Attend general meetings

Most shareholders have the right to attend general meetings and receive proper notice beforehand. If you cannot attend, you may appoint a proxy to act on your behalf.

3. Vote on company decisions

Shareholders vote on business issues through written resolutions or at general meetings. Your voting power typically matches your shareholding percentage. For example, 50% of shares means 50% of voting rights (unless you hold non-voting shares or weighted voting shares).

4. Receive dividends

Ordinary shares carry equal dividend rights per share. Your profit entitlement is relative to your shareholding percentage. However, certain share classes don’t carry dividend rights or only provide dividends under specified conditions.

5. Transfer shares

The right to transfer ownership of shares allows shareholders to sell or give away their shares to other people. Unless modified in the company’s articles, shareholders may transfer their ordinary shares at any time, subject to the director’s approval of such transactions.

6. Exercise pre-emption rights

Pre-emption rights allow shareholders to buy newly available shares proportionate to their existing shareholdings before the company offers them to other people (e.g. other members or potential investors).

These rights of first refusal help protect shareholders’ interests by enabling them to maintain their shareholding percentage upon the issue of new shares. Another benefit of pre-emption rights is that existing members can restrict external investors or inexperienced family members of other shareholders from obtaining new shares in the company.

The Companies Act 2006 provides statutory pre-emption rights to existing shareholders on the allotment of shares, but not on the transfer of shares. However, companies can amend their articles accordingly to remove or alter this provision or to also provide pre-emption rights on the transfer of shares.

7. Inspect company information

This includes looking into the company’s register of members and directors’ service contracts. Shareholders should also be sent a copy of the annual accounts as and when they are prepared for Companies House and/or HMRC.

8. Bring claims against directors

Directors owe duties, including promoting the company’s success, exercising reasonable care, and avoiding conflicts of interest, and shareholders can hold them accountable for these duties. The Companies Act 2006 sets out the general duties of a director owed to a company:

• Act within their powers, in accordance with the company’s articles of association, only exercising those powers for the purposes for which they are conferred
• Promote the success of the company for the benefit of its members as a whole
• Exercise independent judgment and act impartially
• Exercise reasonable care, skill, and diligence when carrying out their duties
• Avoid conflicts of interest
• Refuse to accept benefits or inducements from third parties
• Declare any interest in proposed transactions or arrangements of the company

If a shareholder believes that a company director has demonstrated negligence or a breach of duty, contract, or covenant, they can pursue various claims against that director, including ‘derivative claims’ under section 260 of the Companies Act 2006.

9. Receive final distribution of capital

On the winding up of the company, shareholders have the right to any surplus funds (pro rata on their shareholdings) remaining after all debts and taxes have been paid. However, where a company issues different share classes, capital distribution rights on winding up may not apply to certain shares.

What rights do minority shareholders have?

A minority shareholder is someone who holds less than 50% of the shares in the company.

If two or more shareholders ‘team-up’ and their combined shareholdings reach the minimum threshold, they too have the right to carry out the actions below.

A minority shareholder can:

Call a general meeting and propose a written resolution (at least 5% of shares required)

Shareholders holding at least 5% of the voting rights can require the directors to call a general meeting.

In private companies, they can also require a written resolution to be circulated to all shareholders instead of holding a meeting. Written resolutions can be used to pass both ordinary and special resolutions.

Call for an audit or poll (at least 10% of shares required)

A shareholder can force an audit of a company’s accounts or demand a poll on a proposed resolution.

Stop short-notice meetings (more than 10% of shares required)

Private limited companies normally have to give at least 14 days’ notice for a general meeting. A meeting can only be held on shorter notice if shareholders holding at least 90% of the voting rights agree. A shareholder holding more than 10% of the shares can withhold consent and prevent the meeting from being held at short notice.

Stop squeeze-outs (more than 10% of shares required)

In a takeover, a buyer can force remaining shareholders to sell their shares if they secure 90% of acceptances. This is known as a squeeze-out.

If minority shareholders hold more than 10% of the shares between them, they can prevent the buyer from reaching that level and stop a compulsory sale.

What rights do majority shareholders have?

A majority shareholder is typically someone who holds more than 50% of the company’s shares. Again, if two or more shareholders ‘team up’ and their combined number of shares reaches the percentage required, they too have the right to carry out the below actions.

A majority shareholder can:

Pass ordinary resolutions (more than 50% of shares required)

An ordinary resolution is typically used for matters relating to dividends, shares, and the appointment and removal of directors. A shareholder holding sufficient shares may propose an ordinary resolution.

Pass special resolutions (at least 75% of shares required)

A special resolution is used for important decisions such as changing the company’s articles of association or winding up the company. It requires at least 75% shareholder approval, so a shareholder or group of shareholders with enough shares can pass one without needing unanimous consent.

In practice, this gives majority shareholders significant influence over the direction of the company. However, that influence comes with legal responsibilities and limits. Majority shareholders and directors must act in the interests of the company as a whole and must not use their position in a way that unfairly harms minority shareholders.

If minority shareholders believe the company is being run in a way that is unfairly prejudicial to their interests, they may be able to bring an unfair prejudice claim. Where a majority shareholder acts purely in their own interests and to the detriment of the company or its minority owners, this may also constitute a breach of fiduciary duties.

Example: How rights work in practice

Suppose three shareholders own a company. One holds 60% of the shares, and the other two each hold 20%. The shareholders propose an ordinary resolution to remove a director who they believe is no longer suitable for the role. This requires more than 50% of the voting rights.

In this scenario, the 60% shareholder already has enough voting power to pass the resolution but may still seek wider support for such a significant decision.

The shareholders give 28 days’ special notice of their intention to propose the resolution at a general meeting. The director is notified and has the right to make written representations – a formal written statement explaining their position – before the vote.

If received in time, these must be sent to all shareholders or read out at the meeting. At the meeting (which the director can also attend), the resolution is passed with a simple majority, and the director is removed.

This example shows how majority shareholders can make decisions, while the law ensures the process is fair and transparent. Be aware that employment law still applies.

Checking your rights: Shares, agreements and company documents

Your shareholder rights depend on three key documents working together.

The Companies Act 2006

First, the Companies Act 2006 defines baseline rights, but check your company’s articles of association for any modifications. Most companies use model articles, though some amend them.

Your shareholder’s agreement

A shareholders’ agreement provides extra protections beyond the articles. Think of it like a business prenup – it sets out what happens during disputes, exits, new investors, or sales. There’s no legal requirement to have one, but if you do, review it carefully.

Share class and type details

Your share type matters too. Non-voting shares don’t carry voting rights, while preference shares may have different dividend entitlements. Check your share certificate or the register of members to confirm your share type.

Can shareholders challenge company decisions?

Yes. This is true in the case of both majority and minority thresholds if they meet specific thresholds.

Any shareholder, regardless of how many shares they hold, can apply to the court under section 994 of the Companies Act 2006 if they believe the company’s affairs are being conducted in a way that is unfairly prejudicial to their interests. This is one of the main legal protections for minority shareholders.

Additionally, if shareholders are unhappy with management, they can remove directors and appoint new ones. They can also force the company to hold a meeting, discuss key issues, and ensure decisions are properly voted on by share ownership. And if they suspect mismanagement, fraud, or other serious issues, they can ask the courts to intervene.

Must directors do what shareholders tell them?

The simple answer (and an admittedly frustrating one) is yes and no. Directors are appointed to run the company for its benefit and, ultimately, for the benefit of its shareholders. This is reflected in their legal duties under the Companies Act 2006.

Shareholders can, in some cases, direct directors to act or refrain from acting. However, directors must exercise independent judgment and cannot simply follow instructions if doing so would conflict with their duties.

That said, a shareholder who holds more than 50% of the shares in the company (or is acting together with others to control more than 50%) has the power to remove a director by passing an ordinary resolution.

Even where majority shareholders control company resolutions, directors still owe their duties to the company as a separate legal entity, not directly to its shareholders. This means directors must act in the best interests of the company as a whole, even if that conflicts with the wishes of a majority shareholder.

Can shareholder rights be removed?

In principle, the rights attached to your shares can be changed or even removed, but only by following a strict legal process.

If a company wants to vary or remove class rights, it must follow the formal class rights procedure. This usually requires approval from at least 75% of the affected share class (though the process can be modified in the articles). Shareholders may also apply to the court to block the change.

In practice, this means shareholder rights can be removed, but only where there is overwhelming support. They cannot be purposefully or quietly stripped away.

When will I receive my share certificate?

Any recipient of shares should receive a share certificate no later than two months after acquiring them.

A share certificate serves as proof of ownership, though you’re not the legal owner until the company records your details in its register of members.

Shareholders hold various rights

Shareholder rights give you important powers as a company owner, including voting on decisions, receiving dividends, and holding directors accountable. The extent of these rights depends on your shareholding percentage and share type.

Always check your company’s articles of association and any shareholders’ agreement to understand your specific rights. If you’re unsure about your shareholder status or want to review your company’s shareholding structure, we can help. If you’re reviewing your setup or want to understand your rights as a new shareholder, 1st Formations can help. Speak to our team or browse our formation packages to get started.