Shareholder or director?
Written by Charlie Palmer on 29/11/2019
  • Do you make your star–colleague a shareholder or director?

Shareholders with minority rights have a lot more powers than commonly assumed.

As a starting point 

  • Director – exit disputes, are very simple to settle.    Normally the only dispute is over the exit notice period.
  • Shareholder exit disputes are some of the most vicious, and are VERY hard to settle.  


Shareholder:  

If you have shares of

  1. Less than 10% and you have unfair prejudice rights, you can request details on director’s service agreements, loans to directors, related party transactions and you can make a data subject access request.
  2. Shares of 10% plus and you have the right to force a company to undergo a Companies House Audit.
  3. More than 50% you can remove a director
  4. More than 75% you can change the articles.



Director: 

Directors on the other hand, have a duty to promote the company.  

There are very few downsides to appointing any member of staff a director.  

And the duty to promote ensures that they cannot work against you while in your employ.  

And if your director starts talking to the opposition at the same time to plan his or her exit, then you’ve got a claim.

  • Directors MUST have regard to the likely consequence of decisions on the long term 
  • Directors MUST have regard to the interests of the company’s employees.
  • Directors MUST  act fairly between shareholders of the company.  (no talking to a minority player on how to extract business.

IFAC’s advice?  Make your staff directors where you can, but keep them away from the shares.

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