Rights of Shareholders
we will discuss in this topic that what rights does a shareholder have?
A shareholder has not only a part of a company but also certain rights. Rights of Shareholders are various. The shareholder is usually allowed to have a say in important business decisions – and even more.
Shares are participatory securities in a company. By purchasing a share, the shareholder becomes a co-owner of the company and the existing company assets.
The role of the shareholder differs significantly from that of a borrower. The buyer of a bond merely lends the company its capital and thus becomes the creditor of the company.
The shareholder, on the other hand, assumes corporate responsibility – and thus also the entrepreneurial risks of society.
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If a company has to file for insolvency, the shareholder is at the end of the food chain. Only the receivables of suppliers and creditors are served first, and the share issue comes into play only if the remaining assets are still usable.
In most cases, the insolvency of a company for the shareholder ends in a total loss.
Which shareholder rights exist
However, this risk is made attractive to the investor by granting a multitude of rights. The shareholder is usually allowed to have a say in important business decisions – unless he has explicitly renounced this right in which he has acquired a non-voting share.
The right to vote
He may use his right to vote once a year at the Annual General Meeting, at which all owners of the company are invited. During the Annual General Meeting, the investor first has a right to information. Thus, the Management Board and Supervisory Board is entitled to make an account of “his” company, as far as this does not endanger business secrets.
In addition, the investor has a right to vote, which he can use on all agenda items at the Annual General Meeting. These include, for example,
- Discharge of the Management Panel
- The Supervisory Board for the past financial year,
- Major capital measures,
- Alterations to the articles of incorporation or the use of the balance sheet profit.
The right to dividend
The shareholder is entitled to an appropriate share in the business success of the company. This participation is usually effected through a quarterly or annual profit distribution, this is the so-called dividend. Unlike the interest on a classic bond, the dividend is not fixed in advance. It depends on the company’s balance sheet and is decided upon by all shareholders at the suggestion of the management.
The subscription right
A further important right of the shareholder concerns larger capital measures. In this case, the investor has a subscription right which should enable him to maintain his current capital and voting rights in the company. These subscription rights may be exercised either. Then the investor must buy up additional shares from the capital increase. To make this easier, the new shares are usually offered with a corresponding price cut, or the investor decides not to exercise the subscription right. This right can then be sold via the stock market.
For the smallholder, the safeguarding of voting rights is generally irrelevant. After all, it has little influence on decisions in a company. Many smallholders, therefore, choose to sell their subscription rights. However, shareholders are often of great strategic importance for stockholders with large stockpiles. It has an influence on the company and thus enables the decision-making of operational decisions.
- To receive copies of the annual report and the auditor’s report
- To participate and vote in general meetings either personally or through proxy
- To receive dividends
- To receive corporate benefits such as right and bonus
- To inspect the minute books of the general meeting and to receive copies thereof
- To proceed against the company by way of civil or criminal proceedings
- To apply for the winding up of the company
- To requisite an extraordinary general meeting
- To demand a poll on any resolution