LEGAL VIEWPOINT: Public companies & Shareholders By Dr AbdelGadir Warsama, Legal Counsel, Bahrain

Dr AbdelGadir Warsama Ghalib, Legal Counsel, Bahrain

Shareholders rights are clearly provided for in the company law, wherein it has been stated that the ordinary general and the extraordinary general assembly are both not authorized nor allowed to take, add or amend any of the legal rights conferred on the shareholder by the law and or Articles of Association of the company. This important statutory right has been given to all shareholders, regardless of the fact that they are individuals or institutional entities.

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This atmosphere 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 interesting to mention that, many shareholders are either ignorant of this de jure situation or they did not understand that this statutory privilege should be maintained and exercised all through the equity shareholding.

The statutory rights that are protected by the company law and Articles of Association of the company are many, such as, right to attend meetings, right to participate in the discussions, right 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 and accounts…

At certain times there could be some 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, those differences shall not affect or jeopardize the statutory rights that are given to the shareholders.

These types of differences or disagreements happen when shareholders are active and particularly at certain times when the company is planning, for example, merger or acquisition.. etc. There are examples wherein extensive debates had been going-on in America and Europe between shareholders and the management of their companies regarding such important issues. Some companies, therein, have changed or stopped certain projects after facing severe resistance from shareholders. We would like to see such hot debates in our region because we believe that it is high time for local shareholders to be active in exercising the statutory powers conferred on them by law.

As we know, this could be a matter of culture, however, shareholders in the region have 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 management of the company. Those shareholders have got the right to stick firmly to their beliefs and 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 affairs of the company.

This policy if exercised democratically, we believe, will help because it constitutes a 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 in the Board of Directors or 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 other shareholders. We take this opportunity to say that all shareholders are equal and the company belongs to them all without any discrimination or preferential treatment for special or certain groups.

Moreover some shareholders are completely absent and they know nothing about their company and, based on this attitude, they are never consulted or 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 all rights conferred on them by the law. 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 to any of the statutory rights. The right to sue constitutes a cornerstone point to be properly looked for and implemented by both parties, that is to say, the shareholders as well as the company and the competent management. Having good wise shareholders will ultimately yield good corporate entity.. This is good for all parties.


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