Shareholder rights and responsibilities

Key points:

A member of a company is often called a shareholder.
Members of a company have certain rights and responsibilities.

Shareholder role

Members (shareholders) of a company own shares in it. These represent units of ownership of the company. The company has a separate legal existence to its members and its assets belong to the company.

As a member you do not have any liability for the company’s debts in your capacity as a member. Your only financial obligation is to pay the company any amount unpaid on your shares if you are called on to do so. This doesn’t apply to companies limited by guarantee.

If the company is not limited by shares, members may, under certain circumstances, have to contribute to the costs of winding up the company (and any incidental costs).

You can contribute to decisions about the company by voting on resolutions, which are usually made at meetings. Voting rights are tied to the class of shares you hold.

Becoming a member of a company

There are 3 ways you can become a member of a company.

You can be listed as a member at the time of the company’s registration as an Australian company. You must have given your written consent to be a member before the application for registration is made. The names and addresses of everyone who has consented to be a member form part of the application for registration.
You can agree to become a member of a company that is already registered with us. After you have given written consent and your name is entered on the register of members, the company must notify us if it is a proprietary company.
You might already be a member of a companies limited by guarantee when it converts to become a company limited by shares.

Access to the share register

The share register is usually held at the company’s registered office. It contains the name and address of each member, the number of shares held, share classes and the amount that is paid and unpaid on the shares.

Anyone has the right to inspect a company’s share register. As a member, you may inspect the register free of charge. However, the company may charge others to inspect the register. The inspection fee is set out in Schedule 4 of the Corporations Regulations 2001 (Corporations Regulations).

Anyone has a right to request a copy of a company’s share register. A company must provide a copy of the register within 7 days of the request. The maximum fee for supplying this is set out in Schedule 4 of the Corporations Regulations.

When requesting a copy, you must provide your name, address and the purpose of your request. You cannot obtain a copy of a register for an improper purpose, such as:

soliciting a donation from a member
soliciting a member of a company as a stockbroker or sharebroker
gathering information about the personal wealth of a member
making an unsolicited offer to purchase financial products, such as shares or units off-market.

If the company keeps the register on a computer, it must provide the copy in the format set out in Part 2C.1 of the Corporations Regulations.

Access to the company constitution

If you are a member, the company must send a copy of its constitution to you within 7 days of you making a written request. The company may charge the fee for this service set out in Schedule 4 of the Corporations Regulations.

Any changes to the constitution of a public company must be made by a special resolution: see ‘Voting’ below.

Access to financial statements

Members with at least 5% of the votes in a small proprietary company or a small company limited by guarantee may direct the company to:

prepare a financial report and directors’ report for a financial year, and
send them to all members.

The direction must be:

signed by the members giving the direction, and
made no later than 12 months after the end of the financial year concerned.

The direction may specify all or any of the following:

that the financial report does not have to comply with some or all of the accounting standards
that a directors’ report or a part of that report need not be prepared, and
that the financial report is to be audited.

Public companies must prepare and send a copy of their financial accounts to members at least 21 days before the annual general meeting and within 4 months of the end of the financial year.

A company may make financial reports available on a website and supply hard copies only on request. Or it can distribute printed reports to members.

Access to minutes

A company must keep a written record (minutes) of members’ resolutions and meetings. Members have the right to inspect the minute books at the company’s registered office address or principal place of business for free. However, if a member requests a copy of minutes, the company may charge the fee set out in Schedule 4 of the Corporations Regulations.

Dividends

Some companies pay dividends to their shareholders. Directors may determine by what method a dividend is payable. This may include the payment of cash, the issue of shares, the granting of options and the transfer of assets. The company’s constitution may detail an agreed method of payment for a dividend, such as by EFT, cash or cheque. If the company does not use the method set out in the constitution, this is a contractual matter between you and the company.

Meetings

Meetings may be held regularly, or to resolve specific issues. Part 2G.2 of the Corporations Act 2001 sets out the process for calling meetings, conducting meetings and voting at meetings.

A proprietary company can pass a resolution without holding a physical meeting if all members entitled to vote on the resolution sign a document stating that they are in favour of the resolution. This does not apply to a resolution to remove a company auditor.

Company directors have the power to call meetings of all members or of only those members who hold a particular class of share.

Calling a meeting of members

Members who hold at least 5% of the votes that may be cast at a general meeting of the company have the power to:

call and hold a meeting themselves, or
require the directors to call and hold a meeting.

Quorum

A quorum is the minimum number of members required to be present at a meeting to legally transact business. For a meeting of company members, a quorum of at least 2 members must be present for the full meeting. The exception is if the company’s constitution allows something different.

Voting

Different classes of shares may be associated with different voting rights for members. Unless specified by the company’s constitution, each member has one vote in a show of hands, and in a poll, each member has one vote for each share held.

If a company has only one member, that member may pass a resolution by recording and signing their decision.

A member of a company that is entitled to attend and cast a vote at a meeting of members may appoint a person as their proxy. This is someone who can attend the meeting and vote on the member’s behalf.

An ordinary resolution must be passed by a majority (normally, more than 50%). This must be of the votes cast by members entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).

A special resolution must be passed by at least 75% of the votes cast by members entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).