Shareholder Rights to Know About

Many of us have invested in companies. Maybe you haven’t doled out millions of dollars to budding entrepreneurs like the investors on the TV show “Shark Tank,” but if you own shares in a company, then you have legal rights that you may not know about.

Shareholder rights are the powers and privileges granted to those who own shares in a corporation. These rights vary depending on the type of stock held (common vs. preferred) and the company’s governing documents. Generally speaking, though, there are common rights that shareholders generally share. Here’s a look at some of the main ones.

Voting Rights

Common shareholders usually have the right to vote on major corporate decisions, such as electing the board of directors, approving mergers and acquisitions, or making amendments to the company’s articles of incorporation. Each share typically equals one vote, but some companies issue classes of stock with different voting powers.

Right to Information

Shareholders have the right to access information about the company’s financial performance, strategy, and governance. This includes regular financial reports and filings such as annual and quarterly reports. In many jurisdictions, they can inspect the corporation’s books, records, and other important documents.

Right to Dividends

Shareholders are entitled to receive dividends if the board of directors declares them. Dividends are typically a portion of the company’s profits distributed to shareholders. Preferred shareholders usually receive dividends before common shareholders, often at a fixed rate.

Right to Attend Annual Meetings

Shareholders can attend annual meetings where major corporate decisions are discussed and voted on. This allows them to engage directly with management and voice their concerns or opinions.

Right to Sue for Wrongdoing

Shareholders can bring lawsuits against the company or its officers if they believe the corporation has been mismanaged or their rights have been violated. This may include filing a derivative lawsuit on behalf of the corporation if they suspect actions like fraud, breach of fiduciary duty, or gross mismanagement.

Preemptive Rights

In some cases, shareholders have the right to purchase new shares before the company offers them to the public. This right helps shareholders maintain their proportional ownership in the company during new stock issues.

Appraisal Rights

In certain corporate changes, like mergers or acquisitions, shareholders may have the right to request a fair value appraisal of their shares if they disagree with the offered price.

Liquidation Rights

If the company is liquidated, shareholders have a right to a portion of the remaining assets after all debts and liabilities have been paid. Preferred shareholders are paid before common shareholders in such cases.

Contact a Business Litigation Lawyer Today

As a shareholder, you can do more than receive dividends and vote. There are many other things you can do, so make sure you understand your legal rights.

A business litigation lawyer from Cahall Law Firm can help you bring about legal action, if necessary. We’ll help you understand your options. To schedule a consultation, call (941) 281-2019 or fill out the online form.

Source:

morningstar.com/stocks/your-rights-shareholder