What is the threshold for shareholders to challenge director bonus payments?

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Shareholders Holding 10% of Voting Rights Can Challenge Director Bonus Payments

Shareholders who collectively hold at least 10% of a company's total voting rights have the ability to challenge director bonus payments if they believe these payments are not fair to the company. This challenge can be initiated by requiring the company to pass a resolution to approve the payment, either through a written resolution or at a general meeting. If such approval is not obtained, the bonus payment is considered a debt owed by the director back to the company.
Shareholder Approval Threshold

For private companies like TH Properties, the Board of Directors can approve director fees and benefits, provided it aligns with the company's constitution. However, Section 230(4) of the Companies Act 2016 outlines a specific recourse for shareholders. Members who possess a minimum of 10% of the total voting rights can demand that a resolution be passed to approve any such payment if they deem it detrimental to the company's interests.
Mechanism for Challenging Payments

The process for shareholders to challenge a bonus payment involves them requiring the company to formally approve the payment. This approval can be sought either through a written resolution signed by the eligible members or by convening a general meeting specifically for this purpose. The timeframe for shareholders to become aware of such payments and initiate this challenge is within 30 days of gaining knowledge of the payments.
Consequences of Unapproved Payments

If a company fails to secure the necessary approval for director bonus payments through the stipulated shareholder resolution process, the payments are legally considered a debt. This means that the directors who received the unapproved bonuses are obligated to return the funds to the company. Such contraventions of the Companies Act 2016 can also lead to offences, with potential fines for the company and its officers.

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What is the threshold for shareholders to challenge director bonus payments?

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