29 Dec Will your shares in UK Companies be affected post Brexit?
Several years have passed since the referendum in the UK for us to leave the EU. This could easily go out of your mind during this last year with the covid 19 pandemic and the way business has been hit. It is important for all companies to stay focused on business and not let things unravel, including how Brexit might affect your company or your shares.
If you hold shares in a company incorporated in the UK, you may be wondering how your rights as a minority shareholder will be affected once the UK leaves the EU. Although Shareholders Agreements may vary, the following usually applies. Keep reading to understand mechanisms available to ensure dilution does not take place:
If holding 25%+
The minority shareholder will most likely need to vote in favour of any structural changes because the Companies Act 2006 requires a 75% shareholder vote to amend the company’s articles of association, disapply statutory pre-emption rights on a new share issue and approve the redemption or purchase of a company’s shares out of capital.
If holding 5% to 15%
A 15% minority shareholder has the right to object to variation of class rights and can apply to the court to have the variation cancelled on the basis that the change unfairly prejudices them. A 10% minority shareholder has the right to request a full company audit which can be used to investigate legitimate concerns about a business’ finances or as a tactical manoeuvre. A 5% minority shareholder has the power to call a general meeting and propose resolutions of their choosing.
Statutory claims can be brought for unfair prejudice or a statutory derivative claim can be brought by any shareholder, irrespective of the size of their stake.
Contractual rights can be used to supplement statutory rights in the articles of association through Tag-Along rights, Pre-emption rights, Director or observer rights, Minority consent rights or Information rights.
If there has been a fundamental and irreparable breakdown in the relationship between the shareholders and the company’s directors, a shareholder may apply to the court to seek a winding up of the company.
This can be a minefield so you need an expert in your corner fighting for you.