Minority shareholders

1. Forty shares, and what they can already do

Ravi holds 40 of Tamarind Advisory Ltd’s 100 ordinary shares. Meera holds 60. Both shares are fully paid and in one class. Tamarind is a small private company. It has no constitution. Ravi is a minority shareholder in the practical sense that, when both of them vote on a poll, his 40 votes are not a simple majority and are not 75 per cent.

The Act does not give that holding one remedy. It gives him a set of rights that operate before anyone issues a claim, and a set of applications that go to the Court when those rights are not enough. The count of a show of hands, a poll and a written resolution is in the decisions chapter. This chapter uses that count and then follows what Ravi can do with it.

In the meeting

Unless a poll is demanded, a meeting in one place votes by voice or by show of hands. Each shareholder present and voting has one vote. Meera and Ravi are one vote each. There is no casting vote. An ordinary resolution fails on that show of hands if they vote opposite ways.

Ravi may demand a poll alone. His 40 shares are 40 per cent of the voting rights, and the Fifth Schedule lets shareholders representing not less than 10 per cent of the voting rights demand a poll. On the poll, votes follow the shares. Meera’s 60 of the 100 votes cast are 60 per cent. That passes an ordinary resolution and fails a special resolution.

A written resolution needs the signature of shareholders who hold not less than 75 per cent of the votes entitled to be cast. Meera’s 60 do not reach 75. Ravi’s refusal to sign blocks the paper, including a paper that would only have needed a simple majority in the room.

He can also make the board call a special meeting. Shareholders holding not less than 5 per cent of the voting rights on the issue may request it in writing. Forty per cent is above that line. The notice of the meeting is still not less than 21 days. He may put a proposal on that agenda. Where the board receives his notice not less than 28 days before the last day for sending the meeting notice, the company pays to circulate the proposal and the text of any resolution. Where the board receives it later, but not less than 7 days before that last day, he pays. A supporting statement, where shareholders may vote by proxy or by post, is not more than 1,000 words.

A recommendation the meeting makes to the board binds the board only if it is carried as a special resolution, or the constitution so provides. Tamarind has no constitution. On a poll, with both voting, 60 per cent does not carry a special resolution, so an ordinary recommendation does not tell the board what it must do.

What Ravi uses	The line his 40 shares meet	What Meera’s 60 votes still do on a poll
Demand a poll	Not less than 10 per cent of the voting rights	Her 60 per cent passes an ordinary resolution and fails a special resolution
Require a special meeting	Not less than 5 per cent of the voting rights on the issue	She can attend and vote. She does not cancel the request
Block a written resolution	The paper needs 75 of the 100 votes	Her signature alone leaves the paper short
Pass a special resolution himself	75 per cent of the votes cast, or 75 votes on a written resolution	His 40 reach neither figure

Companies Act, sections 104, 105, 107, 116 and 117, and the Fifth Schedule.

Information, an auditor, and a director’s fee

Ravi may ask the company for a statement of the class he holds, the number of shares in that class, the rights and limits on his shares, and the rights attached to any other class. The company need not give a fresh statement where a statement was given in the previous 6 months, he has not acquired or disposed of shares since, the rights have not been altered since, and there are no special circumstances that would make a refusal unreasonable. All four conditions sit together. If the rights have been altered, the company gives the statement.

He may also inspect. On written notice, the records open to any person include the certificate of incorporation, the constitution if there is one, the share register, the directors’ names and residential addresses, the registered office, and the instruments for charges that section 127 requires to be registered. As a shareholder he may, in addition, inspect minutes and resolutions of shareholders, written communications sent to all shareholders or to all holders of a class during the preceding 7 years, including financial statements, certificates the directors have given under the Act, and the interests register if the company has one. The documents are available from the third working day after the notice is served until the eighth working day, between 9.00 a.m. and 5.00 p.m., at the place where the company keeps its records.

Tamarind is a small private company, so it need not appoint an auditor unless a shareholder requires one. Ravi holds 40 per cent. A notice signed by a shareholder who holds at least 5 per cent of the shares, given at or before the time for the annual meeting, requires the company to appoint an auditor. That appointment runs to the next annual meeting. The auditor is then reappointed unless the shareholders, by unanimous resolution, agree not to appoint an auditor. Meera’s votes alone are not that unanimous resolution.

A different 10 per cent line applies to a director’s pay. Where the board approves remuneration or another benefit for a director, or compensation for loss of office, shareholders who consider the payment unfair to the company and who together hold not less than 10 per cent of the voting share capital may, within one month of the payment first being made known to shareholders, require the directors to call a meeting. The meeting approves the payment by ordinary resolution. To the extent the meeting does not approve it, the sum is a debt the director owes the company.

Ravi is inside the 10 per cent. Suppose the board pays Meera a benefit, he hears of it, and within the month he requires the meeting. On a poll both vote, she in favour and he against. Her 60 votes are a simple majority of the votes cast. The ordinary resolution approves the payment. The section 159 debt does not arise. The right gave him the meeting. It did not give him a veto of an ordinary resolution.

He may also ask the Registrar to appoint an inspector. For a company with a share capital, the Registrar may do that on an application by shareholders holding not less than one tenth of the issued shares. Forty of 100 issued shares is above one tenth. The Registrar may require evidence and security for the costs of the investigation before he appoints. The same section lets him appoint where he considers an inspector necessary to protect shareholders or creditors, or necessary in the public interest.

Companies Act, sections 84, 159, 209, 225, 226, 227 and 232.

2. When the company must buy his shares

Section 108 gives a shareholder a purchase right where a special resolution is passed under section 105(1)(a) in order to alter the constitution so as to impose or remove a restriction on the business or activities, and he cast all the votes attached to the shares registered in his name, of which he is the beneficial owner, against the resolution. Where that resolution was passed in writing under section 117, the right arises if he did not sign it. The section also contains a cross-reference to provision 150(1)(c) and (d). In this consolidation, provision 150 deals with the title of a later purchaser and does not set out those paragraphs. The limb the section states in full is the restriction on the business.

Absence from the meeting is not the against-vote. If Ravi stays away and only Meera votes, her 60 votes are all of the votes cast, the special resolution passes, and section 108 does not arise from his absence.

A class right has its own route into the same purchase. Where the capital is divided into classes, a variation of the rights of a class needs a special resolution, or the written consent of the holders of 75 per cent of that class. A holder of that class who did not consent, and did not cast any votes in favour, may apply to the Court under section 178, or may require the company to purchase those shares in accordance with section 108. A resolution that cuts the proportion of votes that class can exercise, or cuts the proportion of dividends or distributions payable to the existing shares of that class, is a variation. Tamarind has one class, so this route waits until a second class exists. The class rules are in the shares chapter.

The notice, the price, and a company that cannot pay

The shareholders pass the restriction on 1 April, at a meeting, and Ravi casts all 40 votes against it. He gives written notice requiring the purchase within 14 days of the meeting, so by 15 April. If the same resolution had passed as a written resolution, the 14 days would run from the date notice of that passing was given to him.

The board then has 28 days from receipt of his notice to tell him which course it will take. It may arrange for the company to buy the shares. It may arrange for someone else to buy them. It may apply to the Court for an exemption. Before the resolution is carried out, it may have the resolution rescinded by a further special resolution, which is how section 105 allows a special resolution under section 105(1)(a) to be rescinded.

Where the company itself will buy, the board has 7 days from its notice to state a fair and reasonable price. If Ravi considers that price unfair, he objects in writing not later than 14 days after he receives it. The company then refers the price to arbitration and, within 7 days, pays a provisional price equal to the price the board stated. He delivers a signed instrument of transfer and any certificate. The arbitrator fixes a fair and reasonable price for the day before the vote, leaving out any rise or fall caused by the resolution or the proposal of it. If the award is higher, the company pays the balance. If it is lower, the company may recover the excess. The arbitration is conducted under the Code de Procédure Civile, as section 110 provides. Where the company does not refer the question, or the arbitrator is not independent or not suitably qualified, Ravi may ask a Judge in Chambers to appoint an arbitrator.

That purchase is not a distribution for the authorisation rule in section 61. It is treated as a distribution for the recovery rules in section 66.

Where another person is to buy, the same price rules apply to that person. If that person does not pay the nominated or arbitrated price, the company indemnifies Ravi for the loss.

The company may ask the Court to exempt it from buying where the purchase would be disproportionately damaging, where the company cannot reasonably be required to finance it, or where it would not be just and equitable to require the purchase. On the first two of those grounds the Court does not exempt the company unless the company has made reasonable efforts to find another buyer.

A separate application is mandatory where the board has resolved that a purchase by the company would leave the company failing the solvency test, and reasonable efforts have not found another buyer. The Court may exempt the company, suspend the obligation, or make another order, including setting the resolution aside, directing the company to act or not to act, ordering compensation, or putting the company into liquidation. For this exemption the stated capital is left out of the solvency test. The ordinary solvency test, in section 6, requires assets to be greater than liabilities plus stated capital. Section 113 asks whether the purchase would make the company fail the solvency test and then directs that stated capital not be taken into account, unless a price agreement under section 110 already requires stated capital to be counted and Ravi has not consented to leave it out.

Companies Act, sections 6, 66, 105, 108, 109, 110, 111, 112, 113 and 114.

3. Which court application matches the wrong

The purchase right does not ask whether the resolution was fair. It asks whether the listed resolution passed and whether Ravi voted against it, or refused to sign the written form. Other wrongs use other sections. The applicant, the timing, and the loss he is allowed to claim are different.

Before the act is finished

The Court may restrain a company, or a director, that proposes to act in breach of the constitution or the Act. The company, a director, a shareholder or an entitled person may apply. An entitled person is a shareholder, and also a person on whom the constitution confers a shareholder’s rights. The order can be made on an interim basis. It cannot be made for conduct that has already been completed.

Suppose Tamarind later adopts a constitution, and section 52 leaves the board’s power to issue shares subject to that constitution. The constitution says the board shall not issue shares unless Ravi has consented in writing. The board is about to issue 20 shares to Meera’s sister without that consent. Ravi may apply under section 169 before the issue is made. Once the issue has been completed, this section does not restrain that completed act.

A loss suffered by the company

A duty owed to the company is enforced in the company’s name. Section 170 allows a shareholder or a director to ask the Court for leave to bring proceedings in the name of the company or its subsidiary, or to intervene in proceedings to which the company or a related company is a party, so as to continue, defend or discontinue them for the company. Leave is granted only where the company does not intend to bring, diligently continue or defend, or discontinue the proceedings, or where it is in the company’s interests that the conduct of the proceedings not be left to the directors or to the shareholders as a whole. The Court also looks at the likelihood of the proceedings, the costs against the relief likely to be obtained, any action the company has already taken, and the company’s interest in the proceedings. Notice of the application is served on the company, and the company may be heard.

Except as that section provides, a shareholder or a director is not entitled to sue in the company’s name. The Court orders the company to meet the reasonable costs of the shareholder or director who was given leave, unless that would be unjust or inequitable. The proceedings may not be settled, compromised or discontinued without the Court’s approval.

The Privy Council in Manhattan Coffee Investment Holding, in liquidation, v Stephen Mbugua Mwagiru [2026] UKPC 21 held that this leave does not apply to a company that is in liquidation. A director who was neither a creditor nor a shareholder had no standing on the insolvency route the Board considered. The judgment is the case study in this course. It does not decide an application by Ravi while Tamarind is still carrying on business.

A personal action against a director is a different claim. It lies for breach of a duty owed to Ravi as a shareholder. It does not lie to recover a fall in the value of his shares, or a failure of those shares to rise in value, where that loss is only the result of a loss the company suffered or a gain the company did not make. If Meera’s decision causes Tamarind a loss, and the value of Ravi’s 40 shares falls only because of that company loss, section 174 does not let him recover that fall as his own loss. The company’s loss is pursued in the company’s name, with leave. Section 174 identifies some duties as owed to shareholders and others, including duties in section 143 and the care standard in section 160, as owed to the company.

He may sue the company itself for breach of a duty the company owes him as a shareholder. Where it is just and equitable, the Court may order the company, the board or a director to take an action that the constitution or the Act requires. Where his name is wrongly entered in or omitted from the share register, he, or any shareholder, may ask the Court to rectify the register, to award compensation, or to do both.

Where other shareholders have the same or substantially the same interest, the Court may appoint him to represent them, and may direct how any sum recovered is shared among the shareholders represented.

Unfair conduct

A shareholder, a former shareholder, or another entitled person who considers that the affairs of the company have been, are being, or are likely to be conducted in a manner that is oppressive, unfairly discriminatory or unfairly prejudicial to that person, may apply to the Court. The same application lies where an act of the company is oppressive, unfairly discriminatory or unfairly prejudicial to that person, in the capacity of shareholder or in any other capacity.

The section 159 meeting in the first part of this chapter can approve Meera’s benefit by ordinary resolution. That approval answers the debt under section 159. It does not decide this application. Ravi may still apply if he considers the conduct unfairly prejudicial. Where the Court considers it just and equitable, it may make the order it thinks fit. The orders include requiring the company or another person to acquire his shares, compensation, regulating the company’s future affairs, altering the constitution, appointing a receiver, rectifying the records, putting the company into liquidation, and setting aside an action taken by the company or the board in breach of the Act or the constitution. No order is made against the company or another person unless that person is a party. The Court records the date and time of the order.

Where the Court alters or adds to the constitution under this section, that alteration cannot be altered again without the Court’s leave. The alteration has the same effect as an alteration the shareholders made under section 44.

The wrong	The application	What it does not do
A listed special resolution passed, and he voted all his shares against it or refused to sign the written resolution	Sections 108 to 113	It does not require proof that the resolution was unfair
A proposed breach of the Act or the constitution	Section 169	It does not restrain a completed act
A loss suffered by the company	Leave under section 170	It is not a claim for the fall in the value of his own shares
A duty owed to him as a shareholder	Section 174 against a director, or section 175 against the company	Section 174 does not recover a loss that is only the company’s loss reflected in the share price
Oppressive, unfairly discriminatory or unfairly prejudicial conduct	Section 178	The Court chooses the order. The applicant does not choose a purchase as of right

Companies Act, sections 95, 143, 160, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178 and 179. Manhattan Coffee, [2026] UKPC 21.

A Global Business Licence or an Authorised Company

Tamarind holds neither. For a company that holds a Global Business Licence, and for an Authorised Company, the Thirteenth Schedule disapplies sections 178 and 179 unless the constitution provides otherwise. The lists of what those permissions switch off are in the global business chapter.

Companies Act, Thirteenth Schedule.

What you should now be able to explain

Ravi’s 40 shares let him demand a poll, require a meeting, block a written resolution, require an auditor, inspect the shareholder records, and ask the Registrar to consider an inspector. On a poll they do not stop Meera’s 60 votes passing an ordinary resolution, including approval of a director’s benefit under section 159. A purchase under section 108 follows the listed resolution and his vote or his missing signature, and then the 14-day notice and the price. Unfair conduct, a proposed breach, a company loss, and a duty owed to him personally are separate applications. Leave to sue in the company’s name does not apply once the company is in liquidation.

Next: what Meera must do if she believes the company cannot pay its debts, and how the company leaves the register.