It is easy to assume that shareholding is all about pidends and decision-making power. But when it comes to shareholder rights, the reality is much more layered. The rights you get as a shareholder depend heavily on how much of the company you actually own.
For lawyers advising investors, founders, joint venture parties or potential acquirers, these thresholds are not just technicalities. They are crucial points of leverage, protection and control. This article sets out the key statutory and practical rights associated with shareholding in a UK private limited company. It also highlights what to look out for in practice when advising clients on shareholder agreements and governance.
Shareholder rights at a glance
Shareholders' rights in the UK are derived from a combination of sources. The Companies Act 2006 sets out certain default positions. Articles of association and shareholders' agreements may expand, restrict or clarify these rights. The following thresholds outline the main statutory entitlements that arise at different levels of shareholding.
| Shareholding % | Key Rights |
| Any | Right to attend general meetings. Right to vote (if holding voting shares). Right to receive pidends if and when declared. Right to receive a share of capital on winding up. Right to inspect the register of members. |
| >5% | Right to require directors to call a general meeting (s.303 CA 2006). Right to prevent general meetings being held on short notice (s.307). In public companies, right to require a resolution to be circulated and included at an AGM (s.338). |
| >10% | Right to demand a poll vote at general meetings. Right to block certain schemes of arrangement under Part 26 of the Companies Act. |
| >25% | Ability to block special resolutions, which require 75 percent approval. This includes resolutions to alter the articles of association, change the company's name or approve certain capital restructurings. |
| >50% | Ability to pass ordinary resolutions. This includes appointing or removing directors, approving annual accounts, declaring pidends, or authorising allotment of shares (subject to pre-emption rights). |
| Shareholding % | Key Rights |
| 75%+ | Power to pass special resolutions, allowing significant changes to the company's constitution or operations. |
| 90%+ | Right to approve short notice of general meetings in private companies. Post-takeover, the right to trigger compulsory acquisition (squeeze-out) of minority shareholders (s.979). |
| 100% | Complete control. Ability to make all decisions unless limited by the articles or prior agreements. |
What the Companies Act provides
The Companies Act 2006 provides the statutory backbone of
shareholder rights. Many of these are based on voting thresholds.
An ordinary resolution requires a simple majority of those voting.
A special resolution requires at least 75 percent of those voting
in favour. These votes are usually passed on a show of hands unless
a poll is demanded. Shareholders can also apply to the court for
relief if they believe their interests are being unfairly
prejudiced (s.994).
However, these are default rules. The articles of association and
any shareholders' agreement can shape how rights are exercised
in practice.
Customised rights in shareholders' agreements
In most private companies, especially those with multiple shareholders or external investors, key rights are governed by a shareholders' agreement. These are private contracts that supplement or override statutory rules. They can include:
- Veto rights, such as requiring minority approval for key business decisions regardless of shareholding
- Pre-emption rights on new share issues or transfers
- Drag-along and tag-along rights to manage exits and protect against forced sales
- Deadlock resolution mechanisms in 50:50 or joint venture arrangements
- Information rights beyond those provided by statute
The shareholders' agreement may also stipulate enhanced rights for certain share classes, particularly where preference shares or investor protections are involved.
Common scenarios where thresholds matter
Founders retaining control
Founders may reduce their shareholding to attract funding but aim to retain at least 26 percent. This gives them the ability to block special resolutions and maintain a degree of control over constitutional changes.
Minority investor protections
Investors taking minority stakes often negotiate bespoke rights in shareholders' agreements. While they may not hold enough equity to trigger statutory protections, they can still secure board representation, veto rights and exit protections through contract.
Acquisitions and squeeze-outs
Once a buyer acquires 90 percent of shares in a takeover, they can force the remaining shareholders to sell. This allows clean exits and is especially relevant in mergers and acquisitions where full ownership is a key objective.
Deadlock in joint ventures
In 50:50 arrangements, decision-making can quickly grind to a halt. Legal advisers often need to include deadlock provisions in shareholders' agreements such as casting votes, buy-sell clauses or escalation to arbitration.
Practical tips for lawyers
- Always review the articles and shareholders' agreement in addition to statutory provisions. Customised rights often override the standard position.
- When acting for minority shareholders, negotiate contractual protections to make up for the lack of voting power.
- Be precise about voting thresholds when drafting resolutions or advising on governance. Do not confuse percentage of shareholding with percentage of votes cast.
- In fundraising rounds, consider how dilution
will affect control and whether enhanced rights should be
maintained contractually.
For exits and buyouts, ensure drag-along, tag-along and squeeze-out mechanics are clearly understood and properly documented.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
