A practical guide to shareholder requisitions, director removal, and EGM procedure under the Companies Act 2006
In this Disputes Nightmare scenario digital session, Saul Sender and Shona Coffer, Partners in Mishcon de Reya's Director and Shareholder Disputes team were joined by Daniel Lightman KC (Serle Court Chambers) as they explored what happens when a disgruntled shareholder turns against a board.
The session covered shareholder rights under sections 168 and 303 of the Companies Act 2006, the board's obligations on receipt of a requisition, and what directors should consider where a requisitioned Extraordinary General Meeting (EGM) carries litigation risk.
Watch the full session
Shareholder requisitions and the governance crisis they can trigger
A shareholder requisition can move a disagreement from private frustration to a formal governance issue very quickly. For boards, founders and investors, the immediate question is often not whether the shareholder is unhappy, but what the company is required to do next and how to respond without escalating the dispute unnecessarily.
That is especially true where the shareholder is a significant minority investor, has no seat on the board and feels shut out of decision-making. In that scenario, a requisitioned meeting is often a symptom of a wider breakdown in trust, information flow and governance.
What rights do shareholders have under sections 168 and 303?
Section 168 of the Companies Act 2006 gives shareholders the right to remove a director by ordinary resolution, and section 303 gives qualifying shareholders the ability to require the directors to call a general meeting.
As discussed in the webinar, the right under section 168 is fundamental. A company cannot contract out of it altogether, even though the wider constitutional documents and share rights may affect the practical consequences of any vote.
Section 303 is the route by which shareholders can force the issue onto the agenda. In broad terms, if the statutory threshold is met and the requisition is valid, the board must decide whether to call a meeting or whether there is a proper basis not to do so.
What makes a requisition notice valid?
To be valid, the request must come from members representing five per cent of the paid-up capital carrying voting rights. It must state the general nature of the business or set out the text of the proposed resolution, be signed by the relevant members and be delivered properly to the company.
Once a request is received, the directors have 21 days to send out notice of the meeting (if it in, in fact, a valid request – see below). The meeting itself must be held no more than 28 days after that notice — a compressed timetable for the board to assess its position and take advice.
If the directors do not act, the requisitionists may in some circumstances call the meeting themselves, and the company may have to bear their reasonable costs. That is one reason why getting the statutory mechanics right from the outset matters for both sides.
Does the board have to call an EGM?
In most cases, yes. If the requisition is valid on its face, the starting point is that the board should call the meeting unless a recognised exception applies.
That does not mean the board has to be neutral in substance. As the panel noted, there is a difference between facilitating a shareholder vote and endorsing the proposed resolution. A board may call the meeting, explain why it does not support the resolution and give shareholders the information they need to make an informed decision.
That distinction is often important in practice. A board that is tempted to block the process altogether should first consider whether a more proportionate response is to let the resolution go forward while making a clear recommendation against it.
When can a requisition be rejected?
There are three possible grounds on which a board might refuse to call the meeting (on the basis that it is not a valid notice under section 303):
- The proposed resolution would be ineffective.
- The request is defamatory.
- The request is frivolous or vexatious — a category with a high threshold that boards should approach carefully.
The “ineffective” category does not arise often but provides a legitimate basis for refusal if the proposed resolution would fail to achieve any practical outcome, even if passed. The example given in the session was a proposal to remove a chair where the board could simply reappoint that individual under existing rights.
Defamation is straightforward in principle, although encountered even less often in practice.
The most difficult category is “frivolous or vexatious”, because that is not a label a board can attach simply because it dislikes the request or regards the shareholder as difficult. The discussion made clear that the threshold is high. Repeated requisitions, attempts to recycle matters that shareholders have already rejected, and efforts to use the meeting process as a platform for grievance rather than for legitimate corporate business may support an argument that a request is frivolous or vexatious, but boards should tread carefully before relying on it.
What are the risks of refusing to call an EGM?
Refusing to call an EGM may solve an immediate problem, but it can create a larger one. A board that rejects a requisition on weak or arguable grounds risks reinforcing the impression that it is trying to entrench itself or protect the interests of one shareholder group over another.
That risk is particularly acute where the minority shareholder already feels excluded. In the webinar, the panel noted that an aggressive response can feed a narrative that the divergence between ownership and management has become too stark, especially if company resources are then used to fight the dispute.
Even if the board believes it has a technical basis to reject the requisition, the commercial and evidential consequences of doing so may still be unhelpful later.
Could rejecting the request lead to an unfair prejudice claim?
Potentially, yes. One of the strongest themes in the webinar was that the board’s conduct in dealing with the requisition may itself become part of the story in any later unfair prejudice petition.
If a shareholder argues that they have been marginalised, frozen out or treated unfairly, the company’s response to the requisition may be scrutinised closely. Conduct that appears institutionally biased against the minority shareholder, or the use of company money to advance one faction’s case, can strengthen that wider narrative.
The consequences may extend beyond liability. Board conduct may influence the remedy stage too, including arguments around valuation and whether a minority discount should apply if the dispute ends with a share purchase order.
How should directors balance legal duties and commercial judgement?
The board’s role is not simply to react defensively to an attack on individual directors. Directors still need to act within their statutory duties, including acting for proper purposes and promoting the success of the company for the benefit of members as a whole, while acting fairly as between shareholders.
That means the board should ask itself a series of practical questions before taking a position:
- Is the concern genuinely about legal validity, or is it a personal reaction to criticism?
- Is the board acting in the interests of the company, or sliding into support for one shareholder bloc?
- Would calling the meeting with a recommendation against the resolution be more defensible than trying to stop the process entirely?
These questions are heavily fact-sensitive. The webinar drew an important distinction between a family-owned or closely controlled business – where the board and majority shareholder may effectively be the same people – and a broader governance structure with independent directors and a wider shareholder base. The right response may look very different in those two settings.
Can engagement with the shareholder prevent escalation?
In some cases, yes. One of the more practical points from the session was that the requisition is often driven by a shareholder who feels outside the room, under-informed and increasingly distrustful of management.
The instinctive board response may be to pull up the drawbridge and insist on strict legal rights. But that can intensify the problem, particularly where the shareholder already has very limited access to information under the Companies Act, the articles or any shareholders’ agreement.
A better approach may be to consider whether there is a way to reduce the temperature. Depending on the facts, that might involve more structured communication, greater visibility around board decision-making or some limited form of engagement that addresses the shareholder’s concerns without ceding control of the company’s management.
That will not be appropriate in every case. Some requisitions are tactical, repetitive or genuinely disruptive. Even then, however, the webinar’s message was clear: a board should think carefully about whether its chosen response resolves the issue or simply lays the groundwork for a more entrenched dispute.
Practical lessons for boards, founders and investors
- Start with the legal framework, but don't end there. A requisition should be tested carefully for validity, timing and substance, and any decision not to call the meeting should be based on a genuine and defensible exception rather than irritation or instinct.
- Keep governance discipline. Boards should take advice early, record their reasoning properly and remain alert to the distinction between protecting the company’s interests and taking sides in a shareholder dispute.
- Recognise that process choices can reshape the dispute. Calling the meeting, making a recommendation and allowing shareholders to decide may in some cases be the cleaner path. In others, there may be a proper basis to refuse. Either way, the board should be thinking several steps ahead, including how its conduct will look if the disagreement later reaches court.
- Early engagement can matter. Not every shareholder rebellion can be defused, but some can be contained if the board understands what is really driving the requisition and responds accordingly.
Key takeaways
- Shareholders can requisition the removal of a director by ordinary resolution under section 168 – a right the company cannot exclude by contract.
- A qualifying shareholder holding at least five per cent of the paid-up voting capital can require the board to call a general meeting to vote on the removal under section 303 of the Companies Act 2006.
- Once a valid requisition is received, directors have 21 days to send out meeting notice, with the meeting to be held within 28 days of that notice.
- A board may refuse to call the meeting only on narrow grounds: if the proposed business would be ineffective, the request is defamatory, or if it is frivolous or vexatious.
- The board's conduct during the requisition process may itself be scrutinised in any later unfair prejudice petition, including at the remedy stage.
- Early, considered engagement with a dissatisfied shareholder can in some circumstances contain a dispute before it escalates to litigation.
How Mishcon de Reya can help
Disputes of this kind often require joined-up advice across governance, strategy and litigation, particularly where a requisitioned meeting may lead to wider boardroom or shareholder conflict. Our Director and Shareholder Disputes lawyers advise companies, boards, founders, investors and minority shareholders on director removal, requisitioned meetings, unfair prejudice claims and related disputes, helping clients assess their position quickly and respond in a way that protects both their legal and commercial interests.