Starting a Business
12. The Role of Shareholders
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 07 Jul 2015
- A company member can also be referred to as a shareholder.
- There must be at least one shareholder in a company.
- A member can be either an individual or a company but cannot be a trust or an estate. The trustee or executor of an estate could hold the shares in their own name on behalf of the beneficiaries.
- The members are considered to be the owners of the company as they invest in the company to the value of their shares and in proportion to their 'ownership' of the company.
- Members are generally not liable for the company's debts.
- Usually members will be limited in liability to the value of their unpaid shares.
- However if the company is not limited by shares members may be required to contribute financially to the winding up of the company.
- Shareholder ownership may provide members with certain rights.
- As a shareholder you are entitled to access certain company information such as the share register, company constitution and sometimes the financial statements of the company although if you only have a small shareholding you may not be entitled to those.
- Members are also usually entitled to attend meetings of members and to vote in some decision-making processes.
- The selection of shareholders in a company is important particularly in a family business context.
- There are various Capital Gains Tax (CGT) implications for shareholders as shares are a CGT asset. It can be difficult to change a shareholder without giving rise to CGT consequences.
- Shareholders should also be aware of their position in the event of insolvency of the company.
- Generally shareholders are prioritised after creditors in the case of an insolvency. If the company has many debts shareholders may have a capital loss when the company becomes insolvent.
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