Rights of minority shareholders in companies: what not to forget?
Authors of the article: Mgr. Pavel Čech, ARROWS (office@arws.cz, +420 245 007 740)
Minority shareholders of limited liability companies often find themselves in a position where their vote does not carry sufficient weight in the company's decision-making. However, this does not mean that they are completely powerless. Czech legislation offers a number of legal tools that allow minority shareholders to defend their interests and protect their investments. Let's take a look at the key rights that minority shareholders should know and how to use them effectively.
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Who is a minority shareholder and why is their protection important?
A minority shareholder is usually a person who holds a minority stake in a company and does not have control over its management. This puts her in a position where she can easily be outvoted by the majority shareholders. Although the majority usually decides on key issues, the law does remember to protect the rights of the minority.
The protection of minority shareholders is crucial not only to maintain balance in the company, but also to ensure transparency and fairness in decision-making. Without these rights, discrimination, abuse of the majority and harm to the interests of minority shareholders could occur.
Key rights of minority shareholders under the law
The Czech legal system provides minority shareholders with several fundamental rights, in particular:
1. The right to information
Minority shareholders have the right to access information on the company's management. This includes the right to inspect accounting records, minutes of general meetings and other documents.
2. The right to call a general meeting
If the minority shareholders hold at least 10% of the share capital (or a lower limit set by the articles of association), they may request a general meeting. This is particularly useful if they believe that the majority shareholders are ignoring their interests.
3. The right to propose resolutions
Minority shareholders have the possibility to propose specific decisions for consideration at the general meeting. In this way, they can actively influence the direction of the company.
4. The right to protection against abuse of the majority
In the event that the majority of the shareholders adopt a decision that would disadvantage the minority shareholders, the minority shareholders can defend themselves through the courts.
Risks and problems faced by minority shareholders
Despite legal protection, minority shareholders often face problems such as:
- Outvoting at general meetings
Majority decisions may go against the interests of minority shareholders, for example when approving amendments to the articles of association or profit distribution.
- Ignoring their proposals
In practice, minority shareholders' proposals may not be discussed or are rejected without proper explanation.
- Discrimination
Majority shareholders may abuse their position to promote measures that favour only their shareholdings, for example in the distribution of dividends.
How to protect minority shareholder rights?
Protecting minority shareholder rights requires a combination of legal knowledge and good practice. Here are some steps you can take:
1. Precise drafting of the articles of association
The memorandum of association is the basic document of the company. It should be drafted so that minority shareholders have sufficient powers and protection.
2. Use of court protection
If the rights of minority shareholders are violated, they can turn to the courts. The most common actions include actions for annulment of resolutions of the general meeting or actions for damages.
3. Consultation with lawyers
Legal assistance is invaluable in these situations. An experienced attorney can help you not only in crisis situations, but also in setting up preventive measures.
Conclusion: your rights matter - protect them
Minority shareholders don't have to be passive observers. Their rights are protected by law and can play a key role in ensuring justice in society. If you feel outvoted or suspect that your rights are being violated, do not hesitate to contact the experts. ARROWS lawyers will help you find an effective solution and ensure that your voice is heard in society.