Good Essay About Accounting - Rights of Shareholders

Rights of Shareholders

Rights of Shareholders
The main right of the common shareholder is the voting rights at the annual general meetings and any other important meeting called by auditors or the directors of the company. The common shareholders are the real owners of the business and that is why they have the power to alter or amend the decisions which are damaging their interests in the company. With the help of voting rights, common shareholders can terminate directors and auditors. (Howell)
Common shareholders have a right to file lawsuits against the directors of the company if the board of directors tries to affect or change the capital structure of the business. In these circumstances, it is highly probable that the small shareholders’ voting power will reduce. (Howell)
The common shareholders have a right to check the company’s record of accounts and financial statements at any time during the financial year. It is the duty of the company to disclose the required information to the shareholder. Furthermore, another right of common shareholder is to appoint and to remove the directors, auditors and the non executive directors of the company. (Howell)
The common shareholders have the right and share in the earnings of the company. When the company performs well, the shareholders of the company expect that the directors will announce dividends. However, in case of no dividends, the worth of the shareholder’s shares increases in the market. Therefore, it is the right of the shareholder to get benefits from the good performance of the business. (Howell)
The right issue of shares is another right of the shareholders of the company. Whenever, the company decides to raise funds from the share issue, and then the company must offer new shares to the existing common shareholders before making any offer to the public. This right of the common shareholders helps shareholders to maintain the shareholding ratio in the company. (Howell)
The preferred shareholders of the company have the rights according to the risk level of their investments. As compared to the common shareholders, the preferred shareholders have no voting rights at the annual general meetings or any other special meetings. However, the main right of the preferred shareholders is that they are entitled to the fixed annual dividend. (Campbell, 2009)
Another right of the preferred shareholders is that at the time of liquidation of the company, the preferred shareholders are given priority before the common shareholders of the company. The company pays the investment of the preferred shareholders before paying common shareholders. Similarly, it is the right of the common shareholders that the company pays all those assets and funds to the common shareholders which are left after paying to preferred shareholders. (Campbell, 2009)
The preferred shareholders have a right to convert their holding into the common stock of the company. Moreover, like the common shareholders, the preferred shareholders have the right to access the financial information of the business at any time. At the time of dividends, it is the right of the preferred shareholders to collect their dividends before the dividends of common shareholders. (Campbell, 2009)
The preferred shareholders of the company can participate in the voting at the annual general meetings if the articles of the company allow them to do so. In general, the common shareholders participate in the voting only. However, if the articles of the company allow preferred shareholders, they can cast their votes in the annual general meetings. (Campbell, 2009)

References

Howell, R. What Are Two of the Rights That Common Shareholders of a Corporation Have?.
Small Business - Chron.com. Retrieved 1 March 2015, from http://smallbusiness.chron.com/two-rights-common-shareholders-corporation-have-62298.html
Campbell, S. (2009). What Rights Come With Preferred Stock? | Startup Law Blog. Startup Law
Blog. Retrieved 1 March 2015, from http://www.startuplawblog.com/2009/03/21/what-rights-come-with-preferred-stock/