Вы находитесь на странице: 1из 21

Rights and Liabilities of

Shareholders
1. Membership, Register & Index of members
2. Division of Shares & Class rights
3. Declaration and Payment of dividends
4. Variation of Class Rights
5. Liability of Shareholders
6. Forfeiture of Shares
MEMBERSHIP, REGISTER AND INDEX OF MEMBERS

No definition of members in the CA but the Act provides ways and how one
can become a member
1) Section 92(1) subscribers to MOA become members on registration of
the company where the rights and liabilities attach.
2) Through;
a)Allotment this is through a beneficiary who holds in trust and a mortgagee
but a holding vis-à-vis a subsidiary co be hold on behalf thus the allotment
and transfer is void.
b)Operation of law; personal representative of deceased or trustee in the
bankruptcy of an insolvent shareholder.
c)Directors undertaking to take or pay for qualifying shares
d)Estoppel
REGISTER AND INDEX OF MEMBERS
• Section 93(1) Every registered co must keep a register
a) Names b) personal address c)date on which they became a member
d) Date one ceased to become a member.

• Section 93(2) provides for the particulars in the register


• Section 93(7) provides for the treasury shares that includes statement …
• Section 93(8) to (10) provides in default what happens and liability or fine
• Section 95(1) more than 50 members there is a need to keep at its
registered office an index of the name of its members.
Since it’s a public document its free for inspection but on a fee and where on
wants to deny an individual from inspecting the doc a court order must be
sought this is clear in sec 103 of CA
DIVISION OF SHARES AND CLASS RIGHTS.
• Definition of shares is provided in section 3 of the companies Act.
• In the case Borland’s v steel brothers &commissioners of IR V crossman
A share in a company confers upon the shareholder rights an entitlement to
certain privileges enforceable at law thus share is not a sum of money but an
interest measured by the sum of money and made up of various rights… the
interest being composed of rights and obligation provided in the CA,
MOM,AOA
The number of share and the class of share or other interest determines
a)Members right b)level of participation in governance c)management
structure d)management structure in share distribution and finally e)the right
to vote and the weight of each vote.
CLASSES OF SHARESS

GENERAL RULE; The shareholders rank equally and have equal rights
However the CA does not provide for the classes of shares but the members
can do so in the MOA
Ordinary shares have no special rights attached to it. Ie Equity share
1) Income rights who? They are the real owner of the co. when? They get
income after all the classes of shares have obtained dividends
2) Voting rights
3) Capital rights –during winding up return of capital and company debts
have been paid off.
Preference shares
4) Participation preference
5) Redeemable Preference
6) Deferred shares
7) Unclassified shares
8) Non voting ordinary shares
9) Equity shares and debenture shares
Continuation…
case; Bushell v Faith
The plaintiff, the defendant and the sister divided the shares equally. The
defendant and the plaintiff were the directors of the company. The plaintiff
and the sister removed the plaintiff from his office. This was upheld since the
weight of the votes by the defendant was 200 and together with the sisters
100.The weight attached to the voting rights was 1:3:1: The shares are
ordinary
Ordinary shares may attach an non voting right to it.
• Articles operate as a contract thus bind new members
In practice the right of shareholders are specified in the contract between
the members allotted the share.

Preferential ; failure to express so in the articles


They are presumed to rank equally and equal rights.
Declaration and payment of
dividends
• There is no absolute right to a dividend.
• The question of declaration of dividends is usually dealt with by the
articles of associations
• Terms in which dividends are payable and the method of declaration may
depend entirely on the Articles of Associations.
• A Co. in general meeting may resolve that any surplus moneys
representing capital profits be distributed amongst ordinary shareholders.
• Where articles are silent, directors have the general power to determine
distribution of dividends
• Regulation 5 provides for the particulars of the rights attached to the
shares which includes, rights to dividends or distributions attached to
the shares.
• Different classes of shares have different rights to the dividends:
preferential shares - dividends may be fixed
ordinary shares – dividends may fluctuate depending on the performance of the
company
deferred shares - dividends not payable unless the ordinary shareholders are first
paid, for that year.
equity shareholders have no prior limitation to the amount an equity
shareholder may receive.
• In accordance with Regulation 47 of the Companies Regulations,
directors recommendation to pay dividends is required to be disclosed in
their report for the financial year.
How are dividends declared and by who
• It’s usual for articles to state the manner in which dividends may be declared and paid
on the directors recommendation
• Directors have general powers to declare and pay interim dividends from time to time
while final dividends that may be declared are subject to approval by shareholders
• If the date of payment is not specified in the resolution or decision of Board, the
dividends are deemed to be payable and become debts enforceable at law with effect
from the date of declaration
• If specified, the due date is the date fixed for payment of final dividends and not day
of resolution or declaration.
• Interim dividends are regarded as due and payable when actually paid, because the
resolution to pay is liable to variation or rescission at any time before the payment is
made
• A mere resolution or declaration does not in itself warrant a distribution of the
dividends.
• The Act imposes restrictions on the circumstances in which a company may
lawfully declare and pay dividends. S486(1)provides that a company may
make a distribution of dividends only out of profits available for that
purpose

• Profits are deemed to be available for distribution within the meaning of


S486(2) - if they are accumulated, realized and not previously utilized by
distribution or capitalization

• Account must be taken of the company's accumulated and realized losses


not previously written off in a lawful reduction or reorganization of capital

• S486(4) prohibits a company from applying unrealized profits in paying up


debentures or amounts unpaid on its issued shares and such an application
is void
• Unless articles say otherwise, dividends must be paid in cash, in cash or by
cheque drawn on the company's banker and payable to shareholder

• Dividends are not deemed to have been paid, unless and until the
respective shareholders receive payment of money or unless the
distribution is unreservedly put at their disposal.

• Directors must satisfy themselves that the financial status of the Co


warrants distribution of dividends out of profits available to shareholders.

• Once declared directors general power to declare and pay interim


dividends cannot be interfered with by the Co at GM

• Board has power to carry or rescind a resolution passed by members at GM


to pay interim dividends
Variation of Class Rights
• Class rights are attached to the classes of shares in a company and are liable to
variation.
• Variation occurs as prescribed in the articles of association or with the consent
of all members of the company.
• Class rights are contractual, hence the need for consent of the members
concerned
• A decision to vary any class rights of shareholders is of no effect unless:
a) The consent is in writing
b) It is given by the holders of at least 3/4s in nominal values of the
issued shares of that class
c) The proposed variation is sanctioned by a special resolution
passed at a separate general meeting of the holders of the
relevant class of shares

• If rights of shares are varied, the CA S400(1) requires a notice be lodged


with the Registrar gioving notice of the variation, within 14 days after the
date of the variation.
LIABILITY OF A SHAREHOLDER
• Capital distribution determines the number of share to be allotted to each
share holder and the ratio to which the dividends are payable

• The payment may be wholly or partly, thus in partly payment the


company has the right of lien in respect thereof and is entitled to make a
call of the remainder of the capital. Exception can occur during winding up
and this is possible with a special resolution

• A company limited by shares may be defined as one having the liability of


its members limited by its constitution to the amount if any of the unpaid
on the shares held. Hence the company may claim the unpaid amount as a
debt recoverable by the company in contract.
• In the case Cotton LJ in Guinness v Land Corporation of Ireland in case a
limited company by share is wounding up no contribution shall be
required amount if any shall be on the unpaid on the share is liable as a
present or a past member. That the capital in the memorandum is to be
the fund which is to pay the creditors in the event of the company being
wound up.

• The recovery of such capital is a contractual debt the only way one may
avoid this statutory liability is by fully paying the share. (nominal capital)
• In practice part payment due on definite dates or on allotment are subject
to express provision in the articles deemed to calls with the usual
remedies of lien and forfeiture in favor of the company against defaulting
holders

• The liability is not only limited on the on original subscribers but also the
subsequent holder of share.

• He is obligated to pay since he is bound by the subsequent contract of sale


• Its important to note that the subsequent holder liability is not absolute
and that such person may avoid liability in proper cases under section 365
of the CA if he satisfies the court that;

a) he was purchaser for value without notice of the liability attached to it


b) He derived title to the share from a person who became a holder to them
after the contravention to which liability attached
c) The contractual liability has already been discharged
d) The person who incurred the liability was willing to contribute in discharge
of the claim wholly or partly
e) Or any other grounds the court may find just and equittable…
Forfeiture of Shares
• A company does not have an inherent right to forfeit shares.
• The circumstances and procedure in which a shareholder forfeits or
surrenders his shares will usually be provided for In the Articles of
Association
• Forfeiture results from the member’s failure or neglect to pay moneys
unpaid on account of his shares.

• Directors may make calls upon the members in respect of any moneys
unpaid on their shares

• A call is deemed to be a debt due to the company, payable on demand,


failure to which a company by its articles, reserve the right to forfeit the
unpaid shares.
• Thereafter, directors may issue a notice requesting payment naming time
within which payment ought to be made.

• Shares in respect of the notice may be forfeited by a resolution of the


directors on failure to pay after notice.

• Any purported forfeiture in breach of procedure is a nullity.

• The company upon forfeiture has the right to sell to new holders who
become liable for the previous holders dues
• The directors exercise their power to forfeit and dispose of shares subject
to their duty to act bona fides and for a proper purpose in the interest of
the company.

• The sale or disposal of shares is decided by the directors and the forfeiture
itself may be cancelled on their terms.

• A person whose shares have been forfeited ceases to be a member of the


company in respect of such shares.
• They remain liable to pay to the company all moneys which at the date of
forfeiture were payable by him in respect of such shares

• Liability shall be as a debtor and not a member which will cease upon
completion of the payments

• Any capital contribution prior to such forfeiture or surrender is in principle


irrecoverable since a company is prohibited from refunding capital in return
for its own shares

• Wrongful forfeiture renders the company liable for damages to the


aggrieved shareholder as a creditor and not as a member. Because forfeiture
terminates membership of the holder and extinguishes his rights as such

Вам также может понравиться