UK Law and Practice Contributed by: Gareth Sykes, James Palmer, Isobel Hoyle and Hannah Whitney, Herbert Smith Freehills Kramer
and between the shareholders themselves. The shares held by the members give a right of par - ticipation in the company on the terms of the articles of association. A shareholder does not have a proprietary inter - est in the underlying assets of a company. Share - holders are entitled in proportion to their respec - tive shareholdings to a share of the distributed profits of the company and, on a winding-up, to the surplus assets of the company after the company’s creditors have been repaid in full. Shareholders are not liable for the acts of the company, except in very limited circumstances when the corporate veil can be pierced, where a company’s limited liability status is set aside and a shareholder is liable for the company’s acts. 5.2 Role of Shareholders in Company Management The articles of association usually delegate to the directors the exercise of the powers of the company, save for those powers that are required by the articles or the Companies Act to be exercised by the shareholders in a general meeting or by shareholder resolution. There - fore, it is rare for shareholders in their capacity as such to have involvement in the day-to-day running of the company. Shareholders in joint venture companies may agree contractually that certain actions will not be taken by the company unless agreed by a particular number, or major - ity, of shareholders. If desired, shareholders can direct the manage - ment of a company to take, or refrain from taking, certain actions in the business by directing the directors to call a general meeting. Shareholders must hold more than 5% of the voting rights to make this request and must explain the general nature of the issues they wish to raise at the meeting. Directors will not be required to table
a resolution if it is defamatory, frivolous or vexa - tious, or if it would not be effective if passed. 5.3 Shareholder Meetings A public company is required to hold an AGM every year within six months of its financial year- end. There is no statutory requirement for a pri - vate company to hold an AGM (unless they are traded companies) but there may be an express requirement to hold one in the company’s arti - cles of association. For public companies, 21 clear days’ notice of the AGM is required, unless all who are entitled to attend and vote consent to shorter notice being given. Any shareholder meeting other than an AGM is a general meeting. The minimum statutory notice period required for a general meeting of a private company (which is not a traded company) is 14 clear days. For public companies, the minimum statutory notice period for general meetings oth - er than AGMs is 14 clear days, however it is 21 clear days for public companies which are trad - ed companies. Traded companies can reduce the minimum notice period for these meetings to 14 clear days if (i) shareholders have passed an annual resolution to shorten the notice period to 14 clear days, and (ii) the company allows shareholders to appoint a proxy by electronic means via a website. Shareholders holding 90% (in the case of pri - vate companies) or 95% (in the case of pub - lic companies) of the nominal value of shares giving a right to attend and vote may agree to shorter notice of general meetings. The articles of association may specify a longer notice period (but the articles of association cannot specify a shorter period). Until recently, shareholder meetings were almost exclusively physical meetings and there were
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