Shareholders’ rights to information

Authors: Kurt Hyzler & Annah Chapelle Paleologo

While shareholders are the primary stakeholders of a company, they do not manage its day-to-day operations which is left to the directors. However, their rights to access information on the company empower them to monitor the company’s governance, performance, and strategic direction. This access strikes a crucial balance between the responsibilities of directors and the oversight role of shareholders, fostering transparency and accountability within the organisation.

This article highlights the key documents shareholders can access and the important aspects surrounding their availability.

Annual Accounts

One of the most significant rights of shareholders is the ability to review the company’s annual financial performance. Annual accounts provide an overview of the company’s performance for the financial year and include a balance sheet, an income statement or profit and loss account, notes to the accounts, and other relevant financial statements. Companies are required to circulate these accounts to all members well before a general meeting, enabling shareholders to review the company’s financial health and address any concerns.

Auditors’ Report and Directors’ Report

Both the auditors’ report and the directors’ report are essential for providing shareholders with an accurate overview of a company’s financial position and activities.

Auditors play a crucial role in ensuring the accuracy and reliability of a company’s financial information. Whilst the financial statements are drawn up by the management of a company, the auditor’s role is to provide an opinion that these statements are free from material misstatement and comply with the relevant accounting standards. The auditors’ report accompanies the company’s financial statements in the annual report and confirms whether the company’s accounts have been prepared in accordance with applicable standards and whether they provide a true and fair view of the company’s financial position. It also evaluates the consistency between the directors’ report and the annual accounts, highlighting any discrepancies. This report is presented at the general meeting and made available for inspection by shareholders.

On the other hand, the directors’ report is prepared by the directors for each accounting period and should be presented as part of the company’s annual report. It provides an overview of the company’s activities and performance during the accounting period and includes information on the directors, the principal activities of the company and its subsidiaries, significant changes in operations, and a fair review of the company’s performance and position. The report also identifies key risks and uncertainties faced by the company. Shareholders have the right to inspect this report, which is signed and approved by the board before being presented at the general meeting and filed with the registrar.

Register of Members and Register of Debentures 

Shareholders are entitled to access the company’s register of members, which contains details such as the names and addresses of members, the shares held by each member, and the dates of membership changes. This register is the most important document for proving ownership of shares, as it provides an official and legally recognised record of the company’s shareholders at any given time. The significance of this register stems from the definition of “shareholder” as provided for in the companies act; “a person entered in the register of members of a company”. Similarly, the register of debentures lists information about debenture holders and the particulars of the debentures they hold. Both registers are available for inspection free of charge and are to be kept at the registered office of the company or at such other place as may be specified in the memorandum or articles of association of the company.

Minute Books

The minute books of a company document the discussions and decisions made during general meetings. These records are to kept at law at the company’s registered office or another designated location and are open for inspection by shareholders. This ensures transparency and allows shareholders to review the deliberations and resolutions adopted during meetings.

Auditor’s Statement on Cessation of Office

When an auditor ceases to hold office, they must provide a statement outlining any circumstances that should be brought to the attention of the company’s members or creditors. If there are no such circumstances, this should also be noted. Shareholders can inspect this statement, which is deposited at the company’s registered office. If the statement highlights significant issues, it must be circulated to members, unless the company successfully applies to the court to prevent its distribution.

Memorandum and Articles of Association

When establishing a company, the most important documents are the Memorandum and Articles of Association, which outline the company’s governance structure, objectives and rules. The initial M&As of a company are approved by its shareholders and any amendments thereto, except for changes in the company’s registered office or the conversion of shares into stock, require shareholder approval through an extraordinary resolution.

Documents for Amalgamating Companies

Shareholders of companies involved in mergers have the right to access specific documents at least one month before the meeting to decide on the draft terms of merger. These include:

• Draft terms of merger
• Annual accounts and directors’ reports for the past three years
• Accounting statements and directors’ reports on the amalgamation
• Experts’ reports on the amalgamation

Documents for Companies Undergoing Division

Similarly, shareholders of companies undergoing a division can inspect documents at least one month before the meeting to discuss the draft terms of division. These documents include:

• Draft terms of division
• Annual accounts and directors’ reports for the past three years
• Accounting statements and directors’ reports related to the division
• Experts’ reports for the shareholders

Report and Resolution for Transfer of Non-Cash Assets

When a company acquires significant non-cash assets from a subscriber or member within two years of incorporation, specific conditions must be met. These include preparing a valuation report, obtaining approval through an ordinary resolution, and circulating the report and resolution to all members before the relevant meeting. Shareholders’ access to these documents ensures transparency and protects their interests.

Conclusion

Access to essential company information equips shareholders with the tools to hold directors accountable and safeguard their interests. By enabling transparency and promoting informed decision-making, these rights ensure that shareholders can actively contribute to the governance and strategic oversight of the company, strengthening the foundation for its long-term success.