Many people feel that investment in companies is a good way of planning for the future, but they don’t necessarily understand the rights attached to their investment.
What are your rights?
As an investor you’ll be classed as a shareholder in the company. The company’s shareholders are ultimately the owner of the company and, therefore, have the power to decide how the company is run. Whilst a shareholder is the owner of the company, it’s the directors who have the general management and day-to-day running of the company.
As a shareholder you’re entitled to attend the annual general meetings (AGMs), any general meetings that are called, you can vote on both ordinary and special resolutions, propose your own resolutions, have a say on the appointment of directors, and also have a say on the company’s remuneration policy. You also have a right to the share of the company's profits, assets (if the firm is wound up) and copy of the annual accounts.
Shareholders can also seek court action on behalf of the company via The Derivative Claim, if they feel necessary or if they believe the company has been mismanaged by the directors. To bring this action, it must be for the company and not the shareholder personally. (See Minority Share Holder Rights for a brief overview of this claim.)
One share is one vote
Your investor rights are exercised via voting at the AGM or on any resolution that is circulated by the directors or shareholders. The classic and commonly applied model is one share equals one vote.
You may not necessary own simply one share in the company and, therefore, your voting powers grow with your shareholding. For example, if you own 25 shares out of 100, you’ll own 25% of the company, and count for 25% of the vote at the AGM.
However, if you entered into your investment in a collective or via a loan facility to the company, your voting rights may have been curtailed. The best place to look at the rights you have when it comes to voting is the shareholders’ agreement, which you’ll have been provided and signed when you made your investment in the company.
Investor rights are restricted
The rights of an investor in a particular company whilst generally governed by the law, can be curtailed or altered under the shareholders’ agreement. It’s vital that you read and retain this document as your point of reference. As a shareholder you do own the company but remember that you don’t have carte blanche to walk in and demand changes. The directors are responsible for the daily management, and any changes you require must be put to the company at a general meeting or via a written resolution.