The role/duties of shareholders/owners are undermined by the owners. In certain cases, major/majority shareholders consciously or subconsciously take over a company, making the key decisions without consulting other shareholders.
You are a shareholder and own a part of a company if you have done the following things:
1. Subscribed to the Memorandum of the company at its incorporation
2. Appearing as a member under the Register of Members
3. Paying capital and obtaining shares investing in an existing company for a number of shares
4. Receiving a gift/ under a Will, as shares in a company and signing transfer forms.
You are thereby subject to the Articles of Association of the Company required to perform different functions and or obligations, among which are the following:
a. Attend the Annual General Meetings of the Company, or where you are unable to do so, appoint a proxy who will attend on your behalf and present your views.
b. Appoint External Auditors of the Company
c. Review and ask questions when financial statements are presented at the Annual General Meeting
d. Appoint a Board of Directors responsible for overseeing the strategy of the Company and reporting to you as the owner at an Annual General Meeting
e. Review, approve and receive a Dividend from the profits earned by the Company
f. Involved in major investment decisions of the Company.
g. Amend the Memorandum and Articles of Association and participate fully.
h. To recapitalize the Company when it is in need of capital.
As a Business Owner, the following are your rights, and you should endeavour to ensure that they are exercised.
Your rights are as indicated below:
i. To receive, inspect question information that you may not understand or that which is ambiguous.
ii. To inspect the minute books, the Register of Members at an agreed office and within the agreed times.
iii. To refuse the transfer of any shares to a third party, to which you are not agreeable, and in accordance with the Articles of Association.
iv. To attend and vote at meetings, subject to the Articles of Association.
v. To receive dividends paid out of profits earned on an annual basis or as you may have agreed with other shareholders at an Annual General Meeting.
vi. On winding up and after all the liabilities have been paid, to receive a proportionate amount of the remaining capital in a proportion equal to the amount that you contributed at inception.
vii. To proceed to the courts of law, in the event that other shareholders have not considered your thoughts on a decision that is made in relation to the affairs of the Company.
viii. To apply to the Registrar to investigate any company affairs, which you believe were oppressive and non-representative of your views.
ix. To call an Extra Ordinary Meeting where you wish to discuss business of the Company that you believe may not have been considered appropriately. You however should have a minimum of 10% of the total share capital (Double check this with the section on EGMs).
The role/duties of shareholders/owners are undermined by the owners. In certain cases, major/majority shareholders consciously or subconsciously take over a company, making the key decisions without consulting other shareholders.
Usually, minor shareholders do not know that they also have rights and can exercise those rights as is provided for under the law. They allow to be marginalized, while in other cases, they do not receive Dividends, because the majority shareholder thinks that the profits should be re-invested into the Company, a decision that should be made by all the shareholders.
In other cases, a majority shareholder may opt to appoint the Board/ a majority of the Board members, which undermines the powers of other shareholders. This is unacceptable and wrong as the decision to appoint Board members and External Auditors should be done by all the shareholders. The Articles of Association should be clear on these roles and responsibilities of the shareholders and the concepts should be respected by all the shareholders, regardless of their status and or size of stake held in the Company.
M/s. BNM Advocates provides legal representation and advisory services to corporate and individual clients in Uganda and beyond.
We desire to grow and integrate impactful legal solutions that drive business and mitigate risks. Our clients include companies within Banking & Finance, Insurance, Communication, Health, Education, Agriculture, Small and Medium Size Enterprises, Real Estate, Transport and Manufacturing sectors. Our team comprises of experienced legal practitioners both within Uganda and beyond. We pride ourselves in building strong relationships with our clients, by providing professional and innovative legal solutions.