Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

Section 3.3 (iv) of the Guidelines provides for the best practices relating to the rights of shareholders and more so, with regard to election of the directors once nomination and appointment of the directors has been done by the Nominations Committee of said listed company as per the provisions of section 3.1.3 of the Guidelines.

According to section 132(1) as read together with section 256(3) of the Companies Act 2015, a single resolution for nomination and elec- tion of directors ought to be made by simple majority of shareholders (ie, more than two-thirds of the shareholders for ordinary resolutions and at least 75 per cent for passing special resolutions).

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

Division 5 of the Companies Act, 2015 outlines the following transac- tions that require shareholder approval:

  • credit transactions (section 155);
  • directors’ long-term service contracts (section 157);
  • substantial property transactions (section 158); and
  • loans to directors (section 164).
Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

Disproportionate voting rights are allowed in the case of class rights.

Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

The only requirement for shareholders to participate in general share- holders’ meetings or to vote is to have at least one vote per share or 100 shillings of stock.

Body corporate memberships may appoint representatives who are authorised to vote on their behalf.

Only private companies are allowed to act by written consent with- out a meeting so long as 95 per cent of the quorum is present to pass said resolution.

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

Shareholders have a right to convene general meetings by their own motion or through court order and said request must be put to the directors if the said members constitute at least 10 per cent of total shareholders having voting rights or owning share capital. The share- holders are further required to put a written statement of the resolution where assenting or dissenting to the board of directors who then must convene the meeting within 21 days.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

Yes, controlling shareholders owe fiduciary duty to non-controlling shareholders; however, the law has placed no enforcement mechanism should the same be breached.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

The management of the company is responsible for the acts or omis- sions of the company. Shareholders’ responsibility is therefore limited.