corporate management presentation

1. ANASSIGNMENT OFLAW ON CORPORATE MANAGEMENT ON THE TOPIC
CONCEPT OF OWNERSHIP OF SHAREHOLDERS ON THE
ASSETS OF THE COMPANY

2. What is a Shareholder?
•A shareholder can be a person, company, or organization that holds stock(s) in a given company.
•A shareholder must own a minimum of one share in a company’s stock or mutual fund to make them a
partial owner.
•Shareholders typically receive declared dividends if the company does well and succeeds.
•Also called a stockholder, they have the right to vote on some issues concerning the company and to be
elected to a seat on the board of directors.
•As owners of the company, shareholders have a unique relationship to the board and the management
•When the newly formed corporation issues shares to investors, these investors become shareholders.

3. OBJECTIVES OFSTUDY
To Analise the concept
of shareholders.
To Analise the concept
of ownership.
To Analise whether the
concept of ownership by
shareholder regarding
the asset of the company
is a myth or truth?
To provide conclusive
result as to the
ownership regarding
assets of the company.

4. Roles & responsibilities of a Shareholder
Being a shareholder isn’t just about receiving profits, as it also includes other responsibilities.
Any public limited or private limited company has shareholders who contribute capital towards the setting
up and running of the company
Shareholders should promote more effective corporate governance in the company and ensure that the
corporate governance practices meet high standards of accountability, transparency and fiduciary
responsibility. Shareholders must ensure that the affairs of the company are being conducted by the
management, in the best interests of the shareholders.
In cases where the board is not acceding to the requests of the shareholders, the shareholders can act
directly by asking the management to convene an extraordinary general meeting so that they can voice their
opinions.

5. Types of Shareholders
Equity Shareholder: Equity shareholders are those who own the company. They have voting rights in the
company depending upon the number of shares owned by them. They have the right to question
the management of the company’s work.
Preference Shareholder: Preference shareholders do not have any voting rights in the company and thus
cannot interfere in the working of the management of the company. They have the right to receive the
dividend income out of any’s profit before it is paid to equity shareholders. At the time of winding
up, debenture holders are paid first, and then preference shareholders are paid off.
Debenture holders: Debenture holders are not the owners but are the creditors of the company. They do
not have any voting rights. Instead of receiving dividends, they receive interest payments from the company.

6. Rights of Shareholders
Appointment of Directors
Lawful Action Against Directors
Appointment of Company Auditors
Voting Rights
Right to Call for a General Meeting
Right to Carefully Look at Records, Lists, and Books
Right to get Copies of Financial Statements
The Winding of the Company

7. Concept of Ownership in India
In legal literature and case law, ownership is characterized by incidents of rights, powers, liberties and
immunities; and duty and liability. Ownership is only conferred when they are present in sufficiency.
The ownership structure in Indian companies is characterised by what is called promoters and non
promoters. In principle, promoters refer to founders or controlling shareholders while non-promoters refer
to other shareholders, including minority shareholders.
An important feature of the Indian ownership landscape is the presence of “promoters” and “nonpromoters’
In principle, “promoters” denotes those persons that were instrumental at the time of establishing the
company and those who are in control of the company, for example through shareholdings and/or their
management position. “Non-promoters” refer to other shareholders, including minority shareholders. In
India, promoters play a significant role in listed companies.

8. A Comparison between Shareholder Ownership and Control
oWe discussed the roles and responsibilities of the shareholders above. Now we will look at the distinction
between shareholder ownership and control and illuminate how this comparison plays out in the corporate
world.
oTo start with, many public limited companies have a large body of shareholders who have invested in the
company and contributed to the setting up of the company and running it.
oShareholder ownership does not imply control since the company law makes it clear that only a majority
percentage of the shareholders can exercise control.
oTheoretically, shareholders own the company and hence the company ought to be run according to the
dictates of the shareholders. However, in practice, there would be significant differences of opinion among
shareholders, and this leads to a situation where arriving at a consensus is not possible.

9. RIGHT OFASHAREHOLDER ON THE PROPERTY OFTHE COMPANY
The company incorporated under the Companies Act is formed by the promoters who are also the
shareholders of the company.
The company is a separate legal entity and separate from its shareholders. The company is having perpetual
succession. Members may come and may go but the company will survive until it is wound up.
The equity shareholders are the owners of the company. The affairs of the company are run by the Board of
Directors. But certain powers are given only to the shareholders that can be executed in the general
meetings.
The liability of the shareholder is limited to the extent of the value of shares held by him. Beyond that the
shareholder is not having liability. If the company is wound up the equity shareholders is having the last in
the queue. The employees, secured credits, taxes etc., are given priority for settlement.

10. Case Laws
‘Bacha F. Guzdar V. Commissioner of Income Tax’
The Supreme Court held that a shareholder acquires a right to participate in the profits of the company may
be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest
in the assets of the company.
The use of the word ‘assets’ cannot be exploited to warrant the inference that a shareholder, on investing
money in the purchase of shares becomes entitled to the assets of the company and has any share in the
property of the company.
. A shareholder has got no interest in the property of the company though he has undoubtedly a right to
participate in the profits if and when the company decides to divide them.
The Supreme Court further analyzed the role of the shareholders.

11. Further the Concept of ownership of Shareholders on the assets of the company is
discussed in:
Shyamlal PurohitAndAnr. vs Jagannath RayAndAnr
It was held that the "property" of the shareholder, besides and apart from his
right to elect directors, pass resolutions, giving directions to the directors and to
present a winding up petition, consists of his right to participate in the dividends
declared on the profits made in the working of the company and, in case of
winding up to participate in the surplus that may be left after meeting the wind-
Ing up expenses and paying the creditors.”
That a shareholder acquires a right to participate in the profits of the company may
be readily conceded but it is not possible to accept the contention that the
shareholder acquires any interest in the assets of the company.

12. Shareholding in practice
Companies are legal persons and in that capacity, they can own assets and use them in accordance with
the directions given by directors.
As the assets are legally owned and managed by the company, it can grant charges on property and also
license it to third parties to generate income without the permission of shareholders.
Shareholders cannot use the assets of a company to satisfy their own debts. In common with other
consumers, shareholders can use a company’s assets and services by paying a price, but they generally do
not have any special privileges arising from their investment in shares of the company.
Shareholders do not have a right to manage the company or the assets vested in the company in which
they own shares, though they can elect directors to do so. Shareholders can vote on resolutions to
constrain management, but that does not result in the right to manage assets

13. CONCLUSION
Shareholders cannot own companies in the same way that an individual can own a mobile phone.
….Supreme Court
The Supreme Court held that a shareholder acquires a right to participate in the profits of the company may
be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest
in the assets of the company.
A shareholder has got no interest in the property of the company though he has undoubtedly a
right to participate in the profits if and when the company decides to divide them.

14. THANK YOU