What are the rights of shareholders in a private company?

Essentially, general shareholders have the rights to vote, to dividends, and to the company’s yearly performance through the annual general meeting. These shareholders rights are stipulated in the company’s article of association (“the Articles”)  and supplementary documents (if any).

Generally, the shareholder’s rights are as follow:

• To vote in shareholders’ general meetings or in passing resolutions; see further in the FAQ on ordinary and special resolutions;
• To dividends declared by the company;
  • Prerequisites: if there are profits available for distribution and the board of directors had declared to distribute dividends
• To receive a distribution in case of liquidation i.e. shareholders have the right to receive company’s assets proportional to the size of shareholding at the time of liquidation;
• Prerequisites: only if there are assets available for shareholders after creditors and other entities with priority have been repaid
• To the information of the company’s annual financial statements and audit reports

Shareholder agreements also set out the rights and obligations of the shareholders. For instance, it may provide for pre-emptive rights to issue/transfer of shares, right to appoint/remove a director etc..

Can shareholders rights be varied?

Yes, the shareholder’s rights can be altered by amending the Articles. The Articles can be amended by passing a special resolution.

Key takeaways

• General shareholders have the rights to vote, to dividends, and to the company’s yearly performance.
• Shareholder’s rights stated in the Articles can be amended by passing a special resolution.

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