Q&As

Can a majority shareholder force a minority shareholder to transfer their shares (whether to that majority shareholder or a third party)?

read titleRead full title
Produced in partnership with Andrew Mills, Nikhil Nathwani and Alexander Scordino of MJ Hudson
Published on LexisPSL on 18/04/2017

The following Corporate Q&A Produced in partnership with Andrew Mills, Nikhil Nathwani and Alexander Scordino of MJ Hudson provides comprehensive and up to date legal information covering:

  • Can a majority shareholder force a minority shareholder to transfer their shares (whether to that majority shareholder or a third party)?
  • Squeeze-out: compulsory acquisition of shares under the Companies Act 2006
  • Schemes of arrangement
  • Liquidation demerger
  • Drag-along rights

A majority shareholder in a company has limited options under English law to force a minority shareholder to transfer their shares: they must rely on the statutory mechanism of squeeze-out or a scheme of arrangement to effect the transfer or, in a worst-case scenario, resort to liquidating the company. For this reason, a majority shareholder in a company will typically contract with any minority shareholders to gain these rights, using suitably drafted shareholders’ agreements and/or bespoke articles of association.

This Q&A assumes that no shares in the company in question are publicly traded.

Squeeze-out: compulsory acquisition of shares under the Companies Act 2006

Where a proposed buyer makes a takeover offer (as defined in sections 974–976 of the Companies Act 2006 (CA 2006)) for shares in a company, CA 2006 provides the buyer with a right to acquire the shares held by those minority shareholders who have not accepted the offer (known as squeeze-out (CA 2006, ss 979–982)). A majority shareholder in a company may, if making a takeover offer for its shares, use a squeeze-out to acquire the shares of a minority shareholder without their agreement.

The shares of any public or private limited company can be subject to squeeze-out, provided that there is a takeover offer for its shares. There is no requirement for the takeover offer to be regulated by the Takeover Code, although it

Related documents:

Popular documents