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Protection for minority shareholders

22 Mar 2017

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. 

Some constitutional matters, such as changes of the company's name, or to its Memorandum or Articles of Association, or to put it into liquidation (when solvent), require approval by special resolution, i.e. a 75% majority, which can therefore be blocked by shareholders with 25% or more. 

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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The information in this guidance is intended for general information purposes only and does not constitute legal or professional advice. The IoD does not accept any responsibility for any loss which may arise from relying on information contained in this article. It is not a substitute for legal advice and specific and personal legal advice should be taken on any individual matter. IoD does not recommend any firms. The IoD is not accountable for the products, services, acts or omissions on the website(s) linked to this page. Website terms and conditions apply.

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