“By rights you’re a king. If I was you, I’d call for a new deal”, O. Henry
Suppose you are just buying a share in a company for the first time. Or you are anticipate doing that not so long from now. Or just maybe, you are an existing shareholder. Depending on the shareholding company’s articles of association, a document, a lot like a constitution governing the operations of an organisation, you have justifiable claims to certain entitlements as a part-owner of the company.
Perhaps, you find it difficult to put your fingers on what exactly those claims are and you beg the question: “what are my rights and privileges as a shareholder? According to O. Henry, by rights you’re a king. Against this background, thus, highlights the basic rights and privileges that you are entitled to when you buy stock in a company.
Before going into details about shareholders’ rights, here are a few important things that you should know:
- Articles of association exists and depending on the company’s mode of operation, it defines who first gets what- structure of rights and privileges.
- There exist three types of shares issued to holders by a company: common shares, preference shares, and bonds. There is a certain level of preference place on each of the aforementioned securities. What privileges and rights you are entitled to depends on the type of stock you purchase.
- How much dividends you get during profit sharing is factored by what type of share you purchase. Beware if you are planning to buy a common security. There is low preference attached. In the event of liquidation, you will get whatever is left over after all other security holders have been settled.
- However, if the company thrives, a common shareholder, due to their exposure to appreciation in price.
- Shareholder Dispute Attorney is a person who is specialized in legal issues, laws, and all events relating to shareholding business.
Basic Rights You Have As A Shareholder
The right to vote on pressing matters: as a shareowner in a company, you’re entitled to vote for who you want to direct the affairs of the company and make plans of how changes on matters such as liquidation and incorporation. Voting is usually conducted during annual meetings. Shareholding companies have platforms for voting by proxy. In the event that you are unable to attend the meetings, you can vote from anywhere. (More details on voting by proxy).
Certain degree of control over part of the company as a part owner: As a shareowner, you possess part of the company’s assets as well as stock. As stock prices appreciate when the stock gets traded, profits are generated and reinvested in more assets. This in turn yields dividends to which a shareholder is entitled.
Possession Transfer Right: this is the right to convert your assets into either liquid cash or other assets. This is made possible by the liquid nature of shares. In contrast to real estate, which take a little while long to trade for cash or get converted into other assets, the liquidity of stock exchange makes shares more available to markets.
Right to sue the company for breach of agreement: before you invest in shares, you enter into agreement with the company, right! In the event that this agreement get breached by the company, you can fire a shareholder class action lawsuit against them. The term is coined from the 2002 business misconduct that hit Worldcom, with the company making false declaration of it gross revenue and misrepresenting itself before investors. Back then, the company’s shareowners fired shareholder class action lawsuit against it.
Note: shareholders attorneys handle all shareholder class action lawsuit cases.
A shareholder’s rights are factored by the the state and country where the company is located, the articles of association, and much more. In North America, be it common security or bonds, shareholders’ rights are well structured so as to protect shareholders against mismanagement. Most importantly, before you invest in stock exchange, irrespective of the state or country where the shareholding company is located, consult a Shareholder Dispute Attorney to educate you properly on the the laws of the state or country and how the laws affect people seeking to invest in stock exchange.