Minority shareholders holding less than 50% of the voting shares in a company have certain rights provided under the Companies Act 2016 including the following rights:

Shareholding of at least 5%

• Shareholder(s) of a private company representing at least 5% of the total voting rights may block reappointment of the auditor of the company (s 270(1))
• Any shareholder of a private company having a total of 5%, or lower as specified in the constitution, of the total voting rights may require the company to circulate a resolution that may properly be moved as a written resolution (s 302(1))

Shareholding of at least 10%

• Shareholder(s) of a private company holding at least 10% of the total voting rights may require the company to pass a resolution to approve the payment of directors’ fees or other benefits if the shareholder(s) consider the payment was not fair to the company (s. 230(4)). If approval is not obtained, the payment shall constitute a debt due by the director to the company.

Shareholders of at least 25%

• Shareholder(s) with at least 25% of the total voting rights may block special resolutions of a company. (s. 292)

In addition to the rights provided under the laws, it’s important for minority shareholders to negotiate and enter into shareholders’ agreements that offer a reasonable degree of protection for their interests. The agreements should clearly outline key provisions, such as the dividend policy, transfer restrictions, and exit strategies.

A well-considered and carefully drafted shareholders’ agreement is essential to ensure it serves its intended purpose and safeguards the minority shareholders’ position.

This post was first posted on LinkedIn on 25 March 2025.