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Protection for minority shareholders

08 May 2019

Shareholders have ultimate control of a company. However the directors run the company's business and are responsible for its management. In general shareholders cannot interfere, although they can appoint and remove directors. 

To pass a special resolution, 75% of shareholders must vote in favour of it. Consequently, a minority shareholder or shareholders holding more than 25% of a company’s shares can block a special resolution, which is required to make substantive alterations to the operation of a company, including:-

  • changes in the company’s name Memorandum of Articles of Association
  • reducing share capital
  • voluntary liquidation
  • issuing shares otherwise than in accordance with existing pre-emption rights.

Other shareholders' resolutions require only a simple majority, i.e. more than 50% voting in favour. 

The Companies Act 2006 (CA 06) gives some protection to minority shareholders. However it is always preferable to have a shareholders' agreement, which can include more extensive and effective minority protection.

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