The roles and duties of shareholders

Who are shareholders?

The shareholders of a company are effectively the company’s financial supporters. They provide finance to a company by purchasing shares in the company, and thus become shareholders – and part owners of the company.

Shareholders have certain rights, roles and duties to perform as set out in the Companies Act 2006 and the company’s Articles of Association. As shareholders of a limited company, they are protected from liabilities save for the amount of the shares they own but have not paid for.

Shareholders can also be directors of the company. Whilst directors are responsible for the day to day management of the company and making decisions, the shareholders have specific roles and duties in relation to their control over the company.

Roles of the shareholders

Under the Companies Act 2006, major business decisions which would affect shareholders’ rights must be approved by the shareholders at a general meeting called by the directors of the company, by way of special resolution.

Certain decisions can only be made by the shareholders such as: removing a director from office, changing the name of the company, or authorising a service contract for a director which gives him job security for more than two years. In general, shareholders have little power over the directors and how they run the company. Their main role is to attend meetings and discuss whatever is on the agenda to ensure the directors do not go beyond their powers – and provide shareholders’ consent where required.

General meetings

General meetings are meetings of the company’s shareholders. Whilst the company directors may call a general meeting at any time for any reason, shareholders can also request a general meeting, subject to conditions (ie. those requesting the meeting must represent at least 5% of the company’s paid up share capital or, if there is no paid up capital, 5% of the voting rights).

The directors must call a general meeting within 21 days if the shareholders have a valid request. If they don’t, there are procedures enabling shareholders to call one themselves.

Annual general meetings

There is no longer a statutory requirement to hold an annual general meeting if the company is a private company, unless required by its Articles.

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For more information on:

  • Duties of shareholders
  • Ordinary resolution
  • Special resolution
  • The chairman of the meeting
  • The chairman’s casting vote