It is important for shareholders to know that the company law gives all individual or institutional shareholders certain legal rights and protection. This is stipulated in the law, wherein it is provided that the ordinary and the extraordinary general assemblies are both not authorized nor allowed to take, add or amend any of the legal rights given to and conferred on the shareholder by the law and / or the Articles of Association of the company. This important statutory right has been given to all shareholders regardless of the fact that being individuals or institutions.
This constitutes healthy environment and gives each shareholder the necessary boost to preserve such rights and to maintain them all through his holder ship. It would be necessary to mention that some shareholders are either unaware about this de jure situation or they did not understand that this statutory privilege should be maintained and exercised all through the equity ownership. This point highlights a major difference between the rights of the shareholders and the rights of bondholders in the same company. In certain instances, it has been observed that the general assembly has gone astray in relation to certain rights of shareholders. This, to my knowledge, happens frequently. However, it should be very clear that decisions or resolutions taken in such instances, or other similar ones, are considered illegal and void “ab initio”.
The statutory rights that are protected by the company law and the Articles of Association of the company are many, such as the right to attend meetings, to participate in discussions, to call for meetings due to certain reasons and ultimately the right to exercise voting powers during all assemblies, to receive dividends, to examine books, accounts and the like.
At certain times there could be friction or difference of opinion in relation to certain issues between the Board or Directors and the executive management on one hand and some shareholders (could be majority or minority) on the other hand. We believe that this is very normal, however, the differences shall not affect or jeopardize rights given to shareholders such as attending assemblies or receiving dividends at the end of the year. Such differences or disagreements happen when shareholders are active particularly at times when the company is planning, for example, merger or acquisition… etc. There are examples wherein extensive debates had been going on between shareholders and companies regarding important issues. Due to this, some companies changed or stopped certain projects after facing resistance from shareholders. We would like to see such debates in our region as it is time for shareholders to be active in exercising their statutory powers.
As we know, this could be a matter of culture, however, shareholders need to change their attitude and practice towards professionalism and business-type culture. Some shareholders, for different valid reasons, could resist new policies or future strategies adopted by the company. Those shareholders have got the right to stick firmly to their ideas, and the general assembly cannot override or overstep them. This means that everyone, legally speaking, should not be deprived and should be free to give his positive or negative views regarding all matters and affairs of the company. This policy, if exercised democratically, we believe that it will help because it constitutes great advantage to all shareholders who should utilize such room for their own benefit and to protect their interest and, also, the interests of their company.
It has been noticed that some shareholders, particularly those with majority stake holding, have the tendency to believe that the company is their personal property and based on this assumption they act without considering the interests of others. We take this opportunity to say that all shareholders are equal, and the company belongs to all without any discrimination or preferential treatment for special or certain groups. Moreover, some shareholders are completely absent, and they know nothing about the affairs of their company and, based on this, they are never consulted nor involved in major issues. This is not the spirit of the law and, we could say, it is clearly against the intention of the legislature. All shareholders have equal rights and they should be given the chance to exercise the rights.
To protect the statutory rights, legally speaking, any aggrieved or affected shareholder got the right to sue the company, the executive management and the Board Directors in case there is any violation or breach of the statutory rights. The right to sue constitutes a corner-stone to be properly looked for and implemented by both the shareholders as well as the competent management. An active, strong and knowledge shareholder is a good seed for good company. A shareholder who know his rights and dues, is needed to have good company.
Dr. AbdelGadir Warsama Ghalib is Founder and Principal Legal Counsel at Dr. AbdelGadir Warsama Consultancy