In today’s economy it can be a smart business move to invest your funds in a growing company. Along with the benefits and the rights this affords you as a shareholder, there are accompanying responsibilities you need to be aware of.
The first shareholder’s role concerns the appointment of a board of directors. Since the board is responsible for the daily decision making of the company, you as shareholder must ensure the board is elected adequately. Although your company’s Memorandum of Incorporation (MOI) may provide for the appointment or removal of a director by any person named, the Companies Act, 2008 (the Act) requires the shareholders of a profit company to elect at least fifty percent of the directors. Furthermore, shareholders’ approval is required for the remuneration of directors.
Of course this doesn’t mean that you can leave all decisions thereafter to the directors. There are certain instances where you always want to be directly involved, especially where your rights are concerned. The MOI is an important document in establishing the balance of power between shareholders and directors, and you therefore should be involved in any changes proposed to the MOI. Other instances where you should exercise your voting right as a shareholder, include the approval of critical transactions, authorisation of dividends proposed by the directors and name changes of the company.
You will have the opportunity to exercise these rights by voting at the shareholders’ meetings. These must be held at any time the directors are required by the Act or the MOI, to refer a matter to shareholders for decision, and requires a quorum of twenty-five percent of all the voting rights to be present. On request of more than ten percent of shareholders a meeting can be called. This meeting can be held via electronic communication.
Annual General Meetings (AGM) are not a requirement for private companies. However, those private companies requiring an audit, whether due to the Companies Regulations or their MOI, will have to convene an AGM to appoint an auditor annually. The AGM provides shareholders the opportunity to review their company’s audited financial statements and deal with relating directors’ decisions.
Any decisions made at the AGM, are done through either ordinary or special resolutions. Special resolutions are required per the Act, S65(11) or may be required by your MOI. Unless specified, an ordinary resolution will suffice. For a special resolution to be passed, seventy-five percent of the voting rights exercised on the resolution must be for the notion. An ordinary resolution to be passed if more than 50% of the voting rights exercised must be for the notion. These percentages may be amended through the company’s MOI, subject to the provisions of the Act.
Being a shareholder is much more than being a financial supporter. Your involvement is required in the critical decision making of the company and you should be aware of all the rights and responsibilities that comes with this position.