Rights of Shareholder

Topics: Stock market, Stock, Shareholder Pages: 16 (4526 words) Published: April 9, 2013
Rights of Shareholders.


A shareholder is an individual or company that legally owns one or more shares of stock in that company. Shareholders are the owners of companies. A small business may have just one shareholder, the founder, while a public company may have thousands of individual and institutional shareholders, such as mutual fund companies, pension funds and hedge funds. Shareholders play an important role in the financing, operations, governance and control aspects of a business.

Shareholders or stockholders are the persons or firm or companies who purchase the shares of other company. They are the real owner of company. Shareholders may be preference shareholders or equity shareholders. 

Equity shareholders can vote in annual general meeting for passing any resolution. Other side Preference shareholders have preference to get dividend with fixed rate before giving dividend to equity shareholders. All shareholders have to open demat account if they want to deal in shares. As shareholders are the real owner of company, if company suffers loss then shareholders have no right to get dividend. If company is liquidated, then they can receive their money only after paying external creditors and debenture holders. Company has to maintain good relation with shareholders and try hard to bring high rate on capital which is given in the form of shares because every shareholder wants to increase his share capital.

Shareholders have to maintain their contact with different company because they are interested to invest their hard earned money in that place from where they can get high Return On Investment. They have to check the past records from company’s financial statements before investing their money. If any company wants to encourage shareholders, then it has to maintain fair and reliable financial statements and show evidence of its best performance with financial statements.

Shareholders Vs Members

All registered shareholders are members of company but all registered members may not be shareholders because some companies establish without share capital.

Shareholders Vs Brokers

All shareholders may not be brokers but all brokers may be shareholders because brokers have right to deal in share market. If they purchase the shares on the behalf of their customers, they are only brokers not shareholders of company. But due to representing shareholders in share market, they can use some powers of shareholders while they deal.

Shareholders Vs Stockholders 

If shareholders purchase shares in sets form, then they are said stockholders. 

Shareholders Vs Stakeholders

Shareholders may be stakeholders, but stakeholders may be shareholders or may not. Stakeholders are the persons who are affected by that company's operations - including its shareholders, but also its bondholders, managers, workers, retired workers, suppliers, customers, and the communities where it operates.

➢ Rights of shareholders

The rights of shareholders are generally based on the

• Type of share i.e. whether it is equity share or preference share & • The percentage of shares held by them from the total share capital.

The rights, duties and liabilities of all shareholders are clearly defined at the time of issue of the shares. Once the rights of shareholders are fixed, they cannot be altered unless the provisions of the Companies Act for this purpose are complied with. The rights attached to the shares of any class can be varied only with the consent in writing of shareholders holding not less than 75 % of the issued shares of that class or with the sanction of special resolution passed at a separate meeting of the holders of issued shares of that class. However, the following conditions also must be complied with :- 1. The variations of rights are allowed by the Memorandum or Articles of Association of the Company....
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