Keenan and Riches’BUSINESS LAW

Chapter 6Companies

been total failure of consideration. Since being a mem-
ber of a company appears in itself to be a benefit regard-
less of dividends, the minor is unlikely to be able to use
this ‘no consideration’ rule.

Personal representatives

The personal representatives of a deceased member do
not become members themselves unless they ask for and
obtain registration. However, s 770 gives them the right
to transfer the shares.

Bankrupts

A bankrupt member can still exercise the rights of a
member. He may, for example, vote or appoint a proxy
to vote for him. However, he must exercise his rights
and deal with any dividends he receives in the way in
which his trustee in bankruptcy directs. The trustee in
bankruptcy has the same right as a personal representat-
ive to ask for registration as the holder of the shares.

Shareholders’ rights

The main rights given by law to a shareholder are as
follows:

1 A right to transfer his shares. This is subject to any
restrictions which may be found in the articles. Private
companies may restrict the right to transfer shares, for
example by giving the directors in the articles a right to
refuse registration of the person to whom they have
been transferred. Public companies listed on the Stock
Exchange or quoted on the AIM cannot have restric-
tions of this kind in their articles because the agreement
with the relevant regulatory authority forbids it.

2 Meetings. A member is entitled to receive notice of
meetings and to attend and vote or appoint a proxy to
attend and vote for him.
The CA 2006, in Schs 4 and 5, enables notices of com-
pany meetings to be sent electronically to those entitled
to receive them. It also enables a member to appoint a
proxy electronically by communicating with an elec-
tronic address supplied by the company for the purpose.

3 Dividends. A shareholder’s right to dividend depends
on the company having sufficient distributable profits
out of which to pay the dividend.
Although dividend is declared by the members in
general meeting, the members cannot declare a dividend

unless the directors recommend one. Furthermore, they

can resolve to reduce the dividend recommended by the

directors but cannot increase it.

4 Accounts. A shareholder is entitled to a copy of the

company’s accounts within six months of its accounting

reference date (i.e. the end of its financial year) in the

case of a public company and nine months in the case

of a private company. The accounts must be filed with

the Registrar of Companies at Companies House at or

before the end of the above periods according to the

type of company involved.

Listing Rules companies can, however, provide their

shareholders with a summary financial statement giving

merely key information from the full accounts. Nev-

ertheless, those shareholders who want a copy of the

full accounts are entitled to one on request. This is

designed to alleviate the problems faced by certain of the

privatised industries such as British Telecom and British

Gas which have large numbers of shareholders who, for-

merly, had all to receive very bulky and expensive copies

of the full accounts. The full (or shorter form) accounts

of private companies must be circulated to members but

those members can, by unanimous agreement, called an

elective resolution, dispense with the requirement to lay

the accounts before a general meeting. A member and,

where the company has one, the auditor can require

them to be laid and can call a general meeting for the

purpose if the directors will not do so.

The matter of the alteration of shareholders’ rights

has already been considered.

The CA 2006, in Schs 4 and 5, enables copies of the

annual accounts and reports including the summary

financial statements to be sent electronically to those

entitled to receive them or to appear on the company’s

website provided the articles or a members’ resolution

permits this.

Shareholders’ duties

A shareholder is under a duty to pay for his shares when

called upon to do so but is not in general liable for the

company’s debts beyond the amount (if any) outstand-

ing on his shares.

Cessation of membership

The most usual ways in practice that a person may cease

to be a member of a company are by:

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