Company Structure

Learn how a company works and you can strengthen your position as a shareholder.

You must familiarise yourself with the basic building blocks of how companies operate in England and Wales first, before you can begin to understand your position as a shareholder in a limited company.

In law, companies exist independently as separate legal entities. They function through their directors and officers who act as agents for the company. The directors owe certain legal duties to the company. The are also required to fulfil specific legal obligations such as maintaining the company 'books' and records to ensure the company meets its own legal obligations.

Directors and employees are accountable to the company through the board of directors. This is the decision making body that is responsible for the strategic, operational decisions of the company.

A company is generally owned by way of shares issued to investors. In principle, there are almost no limits to the number of shares that can be issued in a company and various types of shares can be created. It is the owners of shares (shareholders) who ultimately have the power to determine the direction of the company and they do this by exercising their voting rights at shareholder meetings. It is important to note, however, that shareholder meetings are normally held much less frequently then board meetings as generally shareholders rarely deal with day to day operational matters.

And the overall framework, within which directors and shareholders operate the company, is set out in the company’s articles of association. The articles are essentially the constitution of the company and they will often prove key in your efforts to assert your rights as a shareholder.