Shareholders agreement - definition of shareholder consent and majority consent

[BrianB]

Hi all,

Quick question:

We have a shareholders agreement. In it we have various clauses that says either 'shareholders consent' and 'majority shareholders consent'. We're happy that majority consent means over 51%. Our shareholders agreement was one we found online.

In our definitions section at the start of the contract we do not have the definition of 'shareholder consent' and I can't seem to find a legal definition online.

Is it:

A: basically majority consent (over 51% of shares)
B: 94%/unanimous (I've found a US website that seems to suggest this number).
C: Something else?

Thanks everyone

[Lance]

Hi all,

Quick question:

We have a shareholders agreement. In it we have various clauses that says either 'shareholders consent' and 'majority shareholders consent'. We're happy that majority consent means over 51%. Our shareholders agreement was one we found online.

In our definitions section at the start of the contract we do not have the definition of 'shareholder consent' and I can't seem to find a legal definition online.

Is it:

A: basically majority consent (over 51% of shares)
B: 94%/unanimous (I've found a US website that seems to suggest this number).
C: Something else?

Thanks everyone

It’s definitely not B. Unless it’s a US Ltd.

The answer is that it depends.....
If you google ( you know what that is don’t you?) ‘shareholder consent’ the second link is a UK legal site with your answer.
Shareholder decisions in a private company FAQs | Business Law Donut

8. We are planning a shareholders' meeting, but a colleague says all the decisions need to be passed by at least 75% of the votes cast. Are they right?
At shareholder meetings most decisions ('ordinary resolutions') are passed if agreed to by a majority of the vote cast, but certain decisions ('special resolutions') require 75% or more of the votes cast.

Votes on resolutions are usually taken by a show of hands, so that each member present in person or by proxy has one vote, regardless of how many shares they hold. However, if a poll is demanded (and the articles will specify who can demand a poll in each particular company) votes are recorded according to the number of shares the voter represents.

Which decisions need to be passed as ordinary resolutions and which as special resolutions depends on the Companies Act, your articles of association and sometimes, an external agreement such as a shareholders' agreement. Normally resolutions to change a company's name or articles of association are among those that require a special resolution.

Be careful if you ask the shareholders to agree to a resolution in writing rather than hold a meeting, because the rules about the majorities required to pass written resolutions are slightly different from those that apply to resolutions at meetings, and the two methods of passing resolutions can result in different outcomes. See 4.

[Lance]

It’s definitely not B. Unless it’s a US Ltd.

The answer is that it depends.....
If you google ( you know what that is don’t you?) ‘shareholder consent’ the second link is a UK legal site with your answer.
Shareholder decisions in a private company FAQs | Business Law Donut

Did it not occur that a shareholders agreement you got from the internet was worth a casual review ( like any contract) so that terms that aren’t defined can be understood or added?
I’ve got £10 that says you used a US shareholder agreement and that’s why it doesn’t have a definition.

[BrianB]

Hi Lance thanks for getting back to me,

The agreement was based on a UK one, and it was hosted on a UK website.

We're happy with everything it's just there is confusion now of what 'shareholder consent' actually means. At the time I thought it meant a simple majority but there is now some disagreement.

Thanks for the link you sent I've been looking at lots of similar documents but it doesn't fully give an answer and that link also doesn't specifically refer to the definition of 'shareholder consent'.

I was asking on here to see if there is a universal definition for it or whether it has to be clearly defined on each document.

In the agreement we have references to majority consent, special resolutions etc which we are all in agreement to etc.

[Lance]

Hi Lance thanks for getting back to me,

The agreement was based on a UK one, and it was hosted on a UK website.

We're happy with everything it's just there is confusion now of what 'shareholder consent' actually means. At the time I thought it meant a simple majority but there is now some disagreement.

Thanks for the link you sent I've been looking at lots of similar documents but it doesn't fully give an answer and that link also doesn't specifically refer to the definition of 'shareholder consent'.

I was asking on here to see if there is a universal definition for it or whether it has to be clearly defined on each document.

In the agreement we have references to majority consent, special resolutions etc which we are all in agreement to etc.

If not defined in the shareholder agreement, or the articles of association then it’s a simple majority except where the law says otherwise.

I don’t know all circumstances where 75% is needed but it’s does include issuance of new shares, or forced buyout of shareholders. Basically you can’t shaft another shareholder unless you have 75%.

[Scruff]

Look at your company's Articles of Association, filed with Companies House. This forms the basis of governing the relationship between Shareholders.

[malvolio]

Look at your company's Articles of Association, filed with Companies House. This forms the basis of governing the relationship between Shareholders.

... and it should cover both "consent" and "quorum" while you're at it.

Changing the AoA is simple enough, by the agreed majority vote at an AGM. Which in your case is a bit Catch-22 it would seem.