{"id":190212,"date":"2024-09-03T07:34:20","date_gmt":"2024-09-03T06:34:20","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=190212"},"modified":"2026-08-03T07:55:53","modified_gmt":"2026-08-03T06:55:53","slug":"rights-and-liabilities-of-shareholders-in-company","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/rights-and-liabilities-of-shareholders-in-company\/","title":{"rendered":"What are the Rights and Liabilities of a Shareholder in a Company?"},"content":{"rendered":"\n

Shareholders in a UK company own equity but do not run it. Under the Companies Act 2006<\/em>, they can attend and vote at general meetings, receive declared dividends, and inspect the register of members. They can also transfer their shares and appoint or remove directors and auditors. Their liability limits to any unpaid amount on their shares, though courts can look behind that protection where fraud occurs. Minority shareholders have separate protections, including derivative claims and unfair prejudice petitions. A company’s articles of association and any shareholders agreement can change how these rights work in practice. This article outlines a shareholder’s rights and liabilities and addresses the rights of minority shareholders.<\/p>\n\n\n\n

Rights of Shareholders<\/h2>\n\n\n\n

1. Right to Attend and Vote at General Meetings<\/h3>\n\n\n\n

A shareholder\u2019s fundamental right is to attend and vote at general meetings<\/u><\/a>. These meetings allow shareholders to participate in decision-making processes, such as electing directors, approving financial statements, and voting on significant corporate actions. <\/p>\n\n\n\n

Shareholders generally accept the concept of “one share, one vote.” This means that each share a shareholder holds entitles them to one vote unless the company’s articles of association or their share class specify otherwise.<\/p>\n\n\n\n

2. Right to Receive Dividends<\/h3>\n\n\n\n

A shareholder also has the right to receive dividends<\/u><\/a> if the company declares them if their share class grants dividend rights. Dividends represent a share of the company’s profits distributed to shareholders based on their shareholdings. <\/p>\n\n\n\n

However, it is essential to note that the declaration and payment of dividends are subject to the company’s financial performance and the board of directors’ discretion.<\/p>\n\n\n\n

3. Right to Inspect Company Records and Accounts<\/h3>\n\n\n\n

Another important right for a shareholder is to inspect the company’s records and accounts. This right lets shareholders access relevant information about the company’s financial performance, operations, and decision-making processes. <\/p>\n\n\n\n

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Companies must disclose certain information to their shareholders to maintain transparency and accountability.<\/p>\n<\/div>\n\n\n\n

4. Right to Transfer Shares<\/h3>\n\n\n\n

A shareholder has the right to transfer their shares<\/u><\/a>, subject to any restrictions imposed by the company’s articles of association, binding shareholder agreements, the Companies Act 2006<\/em> or other applicable laws. This right allows shareholders to realise the value of their investments and facilitates the transfer of ownership.<\/p>\n\n\n\n

5. Right to Appoint or Remove Directors and Auditors<\/h3>\n\n\n\n

In addition to these rights, shareholders can appoint or remove directors and auditors, subject to any restrictions in the company\u2019s articles of association or shareholders agreement. This power ensures that shareholders can hold the company’s management and oversight mechanisms accountable for their actions and performance. <\/p>\n\n\n\n

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If a company fails, the shareholders may make changes at the board level to revive the company.<\/p>\n<\/div>\n\n\n\n

Liabilities of Shareholders<\/h2>\n\n\n\n

1. Limited Liability<\/h3>\n\n\n\n

Limited liability is a fundamental principle in company law, which means that shareholders only owe the amount unpaid on their shares. This protection shields shareholders from being personally liable for the company’s debts and obligations beyond their initial investment.<\/p>\n\n\n\n

However, there are exceptions to the principle of limited liability. For instance, if a shareholder engages in fraudulent activities, they may be personally liable. <\/p>\n\n\n\n

Additionally, shareholders who are also company directors may be subject to additional liabilities arising from their managerial roles and the directors’ duties enshrined in the Companies Act.<\/p>\n\n\n\n

2. Piercing the Corporate Veil<\/h3>\n\n\n\n

In certain circumstances, the courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s actions or debts. Courts typically apply this doctrine in cases where an investor uses the company to shield themselves from liability for their wrongdoing or to perpetrate fraud, money laundering, or other unlawful activities.<\/p>\n\n\n\n

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“Most shareholders assume that owning shares gives them a say in how the business is run. It rarely does. The rights that actually matter, on dividends, on voting, and on what happens when someone wants out, sit in the articles and the shareholders agreement, and people tend to read those documents for the first time when a dispute is already underway.”<\/p>\n <\/blockquote>\n

\n \"Aamna
\n Aamna Mughal<\/span>\n Trainee Solicitor, LegalVision<\/span>\n <\/figcaption>\n <\/figure>\n<\/div>\n\n\n\n

3. Misrepresentation and Insider Trading<\/h3>\n\n\n\n

Shareholders may also be subject to potential liability for misrepresentation or insider trading. Misrepresentation involves providing false or misleading information that induces others to invest in the company. At the same time, insider trading refers to the illegal practice of trading securities based on material, non-public information that a shareholder can access due to their rights as a company member.<\/p>\n\n\n\n

Adhering to the company’s articles of association, shareholders agreements, and relevant laws is crucial for shareholders to avoid potential liabilities. Failure to do so may result in legal consequences and financial implications. <\/p>\n\n\n\n

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Key Statistics<\/strong><\/p>\n

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  1. 5.43 million:<\/strong> The UK Companies House register held 5.43 million companies as at 31 March 2025, most offering shareholders limited liability protection.<\/li>\n
  2. 5.7 million:<\/strong> There were 5.7 million private sector businesses in the UK at the start of 2025, the majority structured as companies with defined shareholder rights.<\/li>\n
  3. 76.7 per cent:<\/strong> Companies accounted for 76.7 per cent of all UK businesses in 2025, emphasising the prevalence of shareholder-governed entities.<\/li>\n<\/ol>\n

    Sources<\/strong><\/p>\n

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    1. Companies House (November 2025)<\/li>\n
    2. Department for Business and Trade (October 2025)<\/li>\n
    3. Office for National Statistics (September 2025)<\/li>\n<\/ol>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n
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