Can Majority Shareholders Appoint a Director in the UK?

Question from Tornike, Can Majority Shareholders Appoint a Director in the UK?

Answer from AI:

In the United Kingdom, the general rule is that majority shareholders do have the power to appoint a director. This is typically outlined in a company’s Articles of Association, which is a document that sets out the rules for running the company.

Appointment of Directors

Under the Companies Act 2006, specifically section 154, a private company must have at least one director and a public company must have at least two. The appointment of directors is usually done by the existing board of directors or by the shareholders.

Shareholders can appoint a director in the following ways:

• Ordinary resolution: This is a vote that requires a simple majority (more than 50%) of the shareholders’ votes. This is the most common way for shareholders to appoint a director.
• Written resolution: This is a resolution that is passed without a meeting, but requires the agreement of a certain number of shareholders. For private companies, this can be a simple majority, but for public companies, it requires a 75% majority.

Role of Majority Shareholders

Majority shareholders, those who own more than 50% of the company’s shares, have significant influence over the company. They can use their voting power to control the appointment and removal of directors. However, they must exercise this power in good faith and in the best interests of the company.

Limitations and Protections

While majority shareholders have significant power, there are limitations and protections in place to prevent abuse. For example, the Companies Act 2006 provides protections for minority shareholders against unfair prejudice. If a majority shareholder uses their power in a way that is unfairly prejudicial to the interests of the minority shareholders, the minority shareholders may be able to bring a claim.

Legal Advice

While this provides a general overview, the specifics can vary depending on the company’s Articles of Association and the circumstances. Therefore, it is recommended that individuals consult with a legal professional for personalized advice.

For more information, you can refer to the Companies Act 2006 and the Model Articles for private companies limited by shares provided by the UK government.