Rights of share holders’ of a company


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Rights of share holders’ of a company

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Rights of share holders’ of a company

  1. 1. Rights of Share Holders’ of a Company EscrowTech India Private Limited Creative Enclave, III Floor, #148-150, Luz Church Road, Mylapore, Chennai, India – 600 004. Phone: +91 44 45535571/72 Tele Fax: +91 44 42104341 Email: info@escrowtech.in Website: www.escrowtech.in P.Geetha Office Administrator
  2. 2. Introduction Levels of Ownership Rights Every company has a hierarchical structure of rights that accompany the three main classes of securities that companies issue: bonds, preferred stock and common stock
  3. 3. Common Shareholders' Six Main Rights 1. Voting Power on Major Issues This includes electing directors and proposals for fundamental changes affecting the company such as mergers or liquidation. Voting takes place at the company's annual meeting. If you can't attend, you can do so by proxy and mail in your vote.
  4. 4. 2. Ownership in a Portion of the Company When business thrives, common shareholders own a piece of something that has value ie., they have a claim on a portion of the assets owned by the company. As these assets generate profits, and as the profits are reinvested in additional assets, shareholders see a return in the form of increased share value as stock prices rise.
  5. 5. 3. The Right to Transfer Ownership Right to transfer ownership means shareholders are allowed to trade their stock on an exchange.. Liquidity is one of the key factors that differentiates stocks from an investment like real estate. If you own property, it can take months to convert your investment into cash. Because stocks are so liquid, you can move your money into other places almost instantaneously.
  6. 6. 4. An Entitlement to Dividends Along with a claim on assets, you also receive a claim on any profits a company pays out in the form of a dividend. Management of a company essentially has two options with profits: they can be reinvested back into the firm (hopefully increasing the company's overall value) or paid out in the form of a dividend. Whenever dividends are declared, common shareholders are entitled to receive their share.
  7. 7. 5. Opportunity to Inspect Corporate Books and Records This opportunity is provided through a company's public filings, including its annual report. Nowadays, this isn't such a big deal as public companies are required to make their financials public. It can be more important for private companies.
  8. 8. 6.The Right to Sue for Wrongful Acts Suing a company usually takes the form of a shareholder class-action lawsuit. A good example of this type of suit occurred in the wake of the accounting scandal that rocked WorldCom in 2002, after it was discovered that the company had grossly overstated earnings, giving shareholders and investors an erroneous view of its financial health. The telecom giant faced a firestorm of shareholder class-action suits as a result.
  9. 9. Corporate Governance In addition to the six basic rights of common shareholders, it is vital that you thoroughly research the corporate governance policies of a company. These policies are often crucial in determining how a company treats and informs its shareholders.
  10. 10. Shareholder Rights Plan A company's shareholder rights plan, is usually accessible in the investor's relations section of its corporate website or by contacting the company directly. In most cases, these plans are designed to give the company's board of directors the power to protect shareholder interests in the event of an attempt by an outsider to acquire the company. To prevent a hostile takeover, the company will have a shareholder rights plan that can be exercised when another person or firm acquires a certain percentage of outstanding shares.
  11. 11. Conclusion As a shareholder, knowing your rights is an essential part of being an informed investor - ignorance is not a defense. Although the Securities and Exchange Commission and other regulatory bodies attempt to enforce a certain degree of shareholder rights, a well-informed investor who fully understands his or her rights is much less susceptible to additional risks.
  12. 12. THANK YOU EscrowTech India Private Limited