What minority shareholders need to know
As a minority shareholder, you have certain rights and protections under UK law. Here are some examples:
Drag and Tag Rights and the sale of a business
Drag and tag rights are provisions in a shareholders agreement that give shareholders the right to drag, or force, other shareholders to sell their shares if certain events occur.
These events are typically major changes in the company, such as a change in control or a sale of assets.
Drag and tag rights can also be triggered by the death or bankruptcy of a shareholder. Tag along rights, on the other hand, give shareholders the right to tag along with another shareholder who is selling their shares. This ensures that all shareholders have the opportunity to sell their shares for the same price. Both drag and tag rights are designed to protect shareholders from being forced out of the company or receiving an unfair price for their shares.
Find out more about drag and tag rights.
Being treated fairly
It is important for companies to treat minority shareholders fairly, in order to maintain a good relationship with them.
There are a few ways to do this, such as giving them a fair share of dividends, treating them equally in terms of voting rights, and not unfairly discriminating against them in any way.
By following these practices, companies can ensure that minority shareholders feel valued and respected, and that their interests are being taken into account. This, in turn, can help to build trust and confidence in the company, which is essential for long-term success.
Information about the company’s affairs
As a minority shareholder, you may be wondering how much information you are entitled to about the company’s affairs.
The short answer is that you are generally entitled to the same information as any other shareholder.
This includes financial statements, minutes of shareholder meetings, and annual reports.
You may also request specific information from the company’s management, although they are not obligated to provide it.
In some cases, minority shareholders may be able to obtain additional information through discovery during litigation. However, this is usually only available if the minority shareholder can prove that the company is withholding information that is material to their investment.
Ultimately, minority shareholders should consult with an experienced lawyer to determine what information they are entitled to and how best to obtain it.
Vote at shareholders’ meetings
As a minority shareholder, you have the right to vote at shareholders’ meetings. However, your voting rights may be limited depending on the size of your stake and the type of meeting. For example, if you own less than 5% of the shares, you may only be able to vote on certain resolutions. Alternatively, if the meeting is an annual general meeting (AGM), only shareholders who have held their shares for a certain period of time (usually one year) may be entitled to vote. You should check the company’s Articles of Association and shareholders agreement to see what your specific voting rights are. If you have any doubts or queries, you can also contact the company’s shareholder relations department.
Receive a share of the company’s profits (dividends)
When a company pays dividends to its shareholders, it is distributing a portion of its profits to the people who own shares in the company. While this might seem like a simple process, there can be a lot of complex legal and financial considerations involved.
For example, minority shareholders may have different rights to dividends than majority shareholders.