UK: Rights of the Minority Shareholder

Last Updated: 22 September 1999

You either hold or are thinking of taking a minority stake in an English limited company. You are concerned to ensure that you have the ability to protect your interest in that company.

What rights will your minority stake automatically entitle you to? What further rights might you consider asking for from the majority shareholders? What remedies are available if the affairs of the company are being run contrary to your interests?

This note should help to make you aware of your rights.

Rights in the Articles of Association

You should always check the company's Articles to see what, if any, protection they afford you. The Articles are a contract between the company and each member and between the members themselves and you can bring an action against the company or the other shareholders if they act in breach of the Articles. The Articles for each company vary but you may, for example, find some protection against:

  • being diluted by issues of new shares without the shares first being offered to you;
  • transfers of shares without the shares first being offered to you;
  • the company exceeding borrowing limits set out in the Articles.

Rights of every Shareholder

There are certain, rather limited, statutory rights to which you are entitled regardless of how many shares you own. You are entitled to receive a copy of the audited accounts of the company, to inspect the register and index of shareholders and to inspect and take copies of the minute books relating to shareholders' meetings.

Also, unless the Articles of Association of the company state otherwise, you are entitled to receive notice of each shareholders' meeting and to attend and vote at those shareholders' meetings.

It is also now possible for a private company to elect to opt out of some of the more basic company law requirements. For example a company may elect to dispense with the laying of its audited accounts before a general meeting, elect to dispense with the holding of annual general meetings or elect to dispense with the re-appointment of its auditors each year. Such elections were introduced principally to allow smaller companies to avoid some of the more costly and inconvenient administrative procedures. However, such elections are not intended to prejudice the rights of shareholders and accordingly such elections cannot be made if you disagree and, whatever the level of your shareholding, you also have certain rights to require a company to recommence such procedures. As a result, where the relevant opting-out election is in place you may:

  • require the audited accounts to be laid before a general meeting of the company, by notice in writing to the company within 28 days of receiving such accounts;
  • require the company to hold an annual general meeting, by notice in writing to the company not later than three months before the end of the year in which the annual general meeting is to be held;
  • propose that the appointment of the company's auditors be terminated, in which event the directors must call a shareholders' meeting to consider that proposal and that meeting must be held within 28 days.

Rights of a 5% plus Shareholder

If a company gives notice to you of a shareholders' meeting and you feel that you have not been given sufficient details of the business being dealt with at that meeting then, if you hold at least 5% of the voting rights of all members, you can require the company to send to each of the shareholders a statement giving further details. In practice this right does not have great value as the statement may be quite short (and cannot exceed 1,000 words).

Also, if you hold at least 5% of the shares in a company you may prevent the company from holding meetings on short notice, which for companies with a limited number of shareholders often makes holding shareholders' meetings considerably more convenient. Meetings usually require 14 days or 21 days notice to be given to shareholders (depending upon the type of business being transacted), so the right to require full notice to be given can cause some unwanted delay.

Rights of a 10% plus Shareholder

If you, together with at least one other shareholder, hold at least 10% of the shares in a company, you may call a shareholders' meeting. In practice, however, since you hold a minority of the shares you will not be able to get matters passed at that meeting so this right is of nuisance value only.

If you hold shares in a company which give you at least 10% of the total voting rights of all shareholders you may also demand that decisions in respect of any particular business at a shareholders' meeting be taken by way of a poll rather than on a show of hands. This means that the number of shares, and associated number of votes, held by each shareholder will be the determining factor rather than simply the number of shareholders voting for or against that resolution. Again, however, this is of little use since your votes will be in the minority.

Under certain circumstances as a 10% plus shareholder you may be able to prevent the sale of the whole of the company, as a purchaser will not be able compulsorily to acquire your shares.

Rights of a 15% plus Shareholder

The principal extra right of any person holding at least 15% of shares in a company applies where the share capital is split into two or more classes. For example "A" ordinary shares and "B" ordinary shares are quite common for joint venture companies or a company may have both ordinary shares and preference shares.

Any proposed variation of the rights of any particular class of shares usually requires the consent of persons holding 75% of the shares of that class (either in writing or of persons attending a class meeting). Whilst a 15% holding might not enable you to block the proposal (although it could if attendance at a class meeting was low), you are entitled to apply to court within 21 days of the written consent or class meeting to object to the proposed variation of your class rights. The court will disallow a variation if it considers that the variation would unfairly prejudice the members of that class. Whilst you would only make an application to court in extreme circumstances, the ability to threaten such an application can often prove useful and you could always withdraw the application later.

Rights of a 25% plus Shareholder

Holding more than 25% of the shares (and associated voting rights) in a company gives you significant rights to block certain proposals. For example any of the following resolutions could not be passed without your consent:

  • to alter the Articles of Association of the company;
  • to wind-up the company voluntarily;
  • to change the name of the company;
  • to approve financial assistance to be given by the company to a purchaser or proposed purchaser of some of its shares;
  • to reduce the share capital of the company;
  • for the company to re-purchase or redeem any of its shares;
  • to disapply the statutory pre-emption provisions (if the company's Articles do not already disapply them) which require new shares which are being issued for cash first to be offered pro-rata to existing shareholders (giving shareholders a chance not to have their shareholding diluted).

So whilst a 25% shareholding will not of itself give you any positive rights it will allow you to have a deciding vote on certain more fundamental matters relating to the company.

Shareholders Agreements

As you will have seen from the above, holding anything less than a majority of the shares in a company does not by itself give you significant rights in the running or control of that company. So, if you are intending to take a minority interest in a company you may want to consider further protection by persuading the other shareholders (and often also the company) to enter into a shareholders agreement.

Whilst there are no set rules as to what should or should not be contained in such a shareholders agreement you may want to cover the following points:

  • being given a right to further, regular information concerning the company and its business (for example monthly or quarterly management accounts);
  • being given the right to appoint a director (often yourself) and that director not being capable of being removed without your consent;
  • each shareholder agreeing not to sell any of his shares either (i) without first obtaining the consent of the other shareholders or (ii) without first offering the shares to the other shareholders at the price at which he is proposing to sell them;
  • certain transactions not being allowed to be carried out without your consent (this might, for example, include acquiring other companies or businesses, changing the business of the company, entering into joint ventures or partnerships, making any purchases or disposals above an agreed level or materially changing employment terms for employees or directors);
  • an agreed policy between you and the other shareholders as to the level of dividends to be paid out each year and when.



If you feel that the company is being run contrary to your interests what action can you take?

If the other shareholders are acting in breach of a shareholders agreement to which you are a party then you can apply to court to enforce that agreement (to require the shareholders to do or refrain from doing the matter in question) or to claim damages for breach of contract. You may also bring an action against the other shareholders or the company if they are acting in breach of the company's Articles. If there is no shareholders agreement then your remedies are more limited. The courts are reluctant to interfere with the operation of a company by the majority of its shareholders.

However, the courts have allowed minority shareholders to make successful claims on behalf of the company against majority shareholders where the company is acting illegally or ultra vires or where the majority shareholders are committing a fraud on the minority. Proving a fraud on the minority can be difficult but a common example is where the majority shareholders take a contract or opportunity offered to the company for their own benefit.

A company may also be wound up upon the order of the court if it believes that it is just and equitable that it should be wound up. You may only apply to court for this order if the shares were originally issued to you or you have held the shares for at least six months. Examples of where the court has found it just and equitable to wind-up the company include where a shareholder/ director of a company which was effectively a partnership between two individuals was removed as director, where there was total deadlock at both board and shareholder level and where a director (who was also the majority shareholder) acted in such a manner that the other shareholders lost confidence in his integrity.

The court will not order a winding-up if you have another remedy which is not "all or nothing". One such possibility is an application to the court for an order that the company's affairs have been or are being conducted in a manner unfairly prejudicial to the interests of some or all of its members. To be successful you must prove "unfair prejudice". Whilst there is considerable uncertainty as to what this means, the more obvious abuses will be picked up -for example, a persistent refusal to give you information to which you are entitled or running the company in a manner intended to diminish the value of your shares so that you may be bought out more cheaply.

If you can show unfair prejudice the court can make whatever order it thinks fit. Possible orders include requiring the company to conduct its business in a certain manner in the future, requiring the company to do or refrain from doing a certain act or (most commonly) requiring the majority shareholders to buy-out the minority at a specified price. Because of the wide range of remedies that it offers, the "unfair prejudice application" is often considered the most appropriate route for minority shareholders to take.


Conclusion Whilst minority shareholdings often work very well (at least while all the shareholders are being friendly) it is only when things go wrong that you can realise how little protection you actually have. However, armed with this note you should be able to decide what rights you might want to seek before taking your shareholding, what rights you have as a minority shareholder and what you can do to enforce your rights if things turn sour.

Should you require further information or specific advice, please contact Charles Martin at Macfarlanes' London office.

This note provides a general outline of this subject. Each case requires specialist advice depending upon its own particular circumstances and no responsibility can be accepted for the application of the principles contained in this note unless we have given such advice.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.