shareholders

A shareholder (now referred to a member under the Companies Acts) is an owner of shares in a company. Due to the principle of separate legal personality, a shareholder does not own any assets of a company, but rather own shares.

The relationship between the shareholders and the company and the rights of shareholders are regulated by the articles of association of the company.

The majority of shareholders usually control the company, however exceptions exist for protection of minority shareholders where the majority act oppressively or cause detriment to the minority, or use powers granted in the articles for their personal benefit.

The law provides for protection of the minority when the majority undertake unfairly prejudicial conduct under s 459 of the Companies Act and minority shareholders may approach the court for relief. The majority is not entitled to use their powers to perpetrate a fraud on the minority.

Usage: The shareholder was allotted 100 shares of a nominal value of £1.00 by the company in consideration of £100.

Related Words: shares; ordinary shares; preference shares; redeemable shares; director; memorandum of association; articles of association; separate legal personality.