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3220368818818BAHAUDDIN ZAKARIYA UNIVERSITY MULTAN

(Bahadur sub campus layyah)

BUSINESS LAW
Submitted to
Qurat ul Ain Farooqi
Submitted by
Muhammad Kamran Arshad MBL-18-16
Ayman Ejaz MBL-18-14
Muhammad Atif MBL-18-13
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﷽
WITH THE NAME OF ALLAH THE MOST BENEFICIAL AND THE MOST MERCIFUL

Contents
ACKNOWLDGMENT ................................................................................................................................. 4
Debenture ...................................................................................................................................................... 5
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Shareholders’ Rights ................................................................................................................................... 15

Appointment of directors ........................................................................................................................ 15
Legal action against directors ................................................................................................................. 15
3. Appointment of company auditors .......................................................................................... 16
5. Right to call for general meetings ............................................................................................ 17
6. Right to inspect registers and books ........................................................................................ 17
7. Right to get copies of financial statements .............................................................................. 17
8. Winding up of the company ..................................................................................................... 17
Other Shareholders’ Rights ............................................................................................................. 17
Shareholders’ Duties ............................................................................................................................... 17
Why we prefer the preference shareholder to common shareholder? ..................................................... 17
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ACKNOWLDGMENT

All praise and thanks belong to ALLAH, THE LORD OF THE WORLDS, the Gracious, the
merciful, the master, and the master of the Day of Judgment. Countless thanks to Allah whom alone do
we worship and whom alone do we call for help, who made me Muslim by birth. Allah gave me potential
and ability to complete my work. All respects and regards to HOLY PROPHET MUHAMMAD (PBUH),
who enable us to recognize our creator and to understand the philosophy of life. I would like to express
my deep and sincere gratitude to my learned and renowned research supervisor respected Sir Shahid
Raza Azami kindly provide me a chance to study this topic and provide me with all necessary facilities
for carrying out my research work.
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Debenture
Meaning
If a company needs funds for extension and development purpose without increasing its share
capital, it can borrow from the general public by issuing certificates for a fixed period of time and
at a fixed rate of interest. Such a loan certificate is called a debenture. Debentures are offered to
the public for subscription in the same way as for issue of equity shares. Debenture is issued under
the common seal of the company acknowledging the receipt of money
Debentures Explained
Similar to most bonds, debentures may pay periodic interest payments called coupon payments.
Like other types of bonds, debentures are documented in an indenture. An indenture is a legal and
binding contract between bond issuers and bondholders. The contract specifies features of a debt
offering, such as the maturity date, the timing of interest or coupon payments, the method of
interest calculation, and other features. Corporations and governments can issue debentures
Governments typically issue long-term bonds—those with maturities of longer than 10 years.
Considered low-risk investments these government bonds have the backing of the government
issuer.
Real world Example of Debenture
An example of a government debenture would be the U.S. Treasury bond (T-bond) T-bonds help
finance projects and fund day-to-day governmental operations. The U.S. Treasury Department
issues these bonds during auctions held throughout the year. Some Treasury bonds trade in the
secondary market. In the secondary market through a financial institution or broker, investors can
buy and sell previously issued bonds. T-bonds are nearly risk-free since they're backed by the full
faith and credit of the U.S. government. However, they also face the risk of inflation and

interest rates increase.

Features of Debenture
1. Debenture holders are the creditors of the company carrying a fixed rate of interest.
2. Debenture is redeemed after a fixed period of time.
3. Debentures may be either secured or unsecured.
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4. Interest payable on a debenture is a charge against profit and hence it is a tax deductible
expenditure.
5. Debenture holders do not enjoy any voting right.
6. Interest on debenture is payable even if there is a loss.
Advantage of Debenture
(a) Issue of debenture does not result in dilution of interest of equity shareholders as they do not
have right either to vote or take part in the management of the company.
(b) Interest on debenture is a tax deductible expenditure and thus it saves income tax.
(c) Cost of debenture is relatively lower than preference shares and equity shares.
(d) Issue of debentures is advantageous during times of inflation.
(e) Interest on debenture is payable even if there is a loss, so debenture holders bear no risk.
Disadvantages of Debentures:
(a) Payment of interest on debenture is obligatory and hence it becomes burden if the company incurs
loss.

(b) Debentures are issued to trade on equity but too much dependence on debentures increases the
financial risk of the company.
(c) Redemption of debenture involves a larger amount of cash outflow.
(d) During depression, the profit of the company goes on declining and it becomes difficult for the
company to pay interest.
Different Types of Debentures
Ordinary Debenture:
Such debentures are issued without mortgaging any asset, i.e. this is unsecured. It is very difficult
to raise funds through ordinary debenture.
Mortgage Debenture:
This type of debenture is issued by mortgaging an asset and debenture holders can recover their
dues by selling that particular asset in case the company fails to repay the claim of debenture
holders.
Non-convertible Debentures:
A non-convertible debenture is a debenture where there is no option for its conversion into equity
shares. Thus the debenture holders remain debenture holders till maturity.
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Partly Convertible Debentures:

The holders of partly convertible debentures are given an option to convert part of their debentures.
After conversion they will enjoy the benefit of both debenture holders as well as equity
shareholders.
Fully Convertible Debenture:
Fully convertible debentures are those debentures which are fully converted into specified number
of equity shares after predetermined period at the option of the debenture holders.
Redeemable Debentures:
Redeemable debenture is a debenture which is redeemed/repaid on a predetermined date and at
predetermined
Irredeemable Debenture:
Such debentures are generally not redeemed during the lifetime of the company. So, it is also
termed as perpetual debt. Repayment of such debenture takes place at the time of liquidation of
the company.
Registered Debentures:
Registered debentures are those debentures where names, address, serial number, etc., of the
debenture holders are recorded in the register book of the company. Such debentures cannot be
easily transferred to another person.
Unregistered Debentures:
Unregistered debentures may be referred to those debentures which are not recorded in the
company’s register book. Such a type of debenture is also known as bearer debenture and this can
be easily transferred to any other person in Virtual.

Dissolution of Firms
When the relationship between all the partners of the firms comes to ends this is called dissolution
of firm
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Dissolution of partnership is different from the dissolution of firm

They are involves a change in the relation of the firm whereas the solution of firm amount
to complete closure of the business when any of the partners dies retires or become insolvent but
if they remaining partners still agree to continue the business of the partnership firm, then it is dissolution
of partnership not the dissolution of firm. Dissolution of partnership changes the mutual relations of the
partners. But in case of dissolution of firm, all the relations and the business of the firm comes to an end.
On dissolution of the firm, the business of the firm ceases to exist since its affairs are would up by selling
the assets and by paying the liabilities and discharging the claims of the partners. The dissolution of
partnership among all partners of a firm is called dissolution of the firm.
Dissolution of a Partnership firm may be effected in the following ways: Dissolution without the
intervention of the Court.

Dissolution without the intervention of Court:-

1. By Agreement (S.40)
A partnership firm can be dissolved any time with the consent of all the partners whether the partnership
is at will or for a fixed duration. A partnership can be dissolved in accordance with the terms of the
Partnership Deed or of the separate agreement.

2. Compulsory Dissolution (Sec.41):- In case, any of the following events take place then it becomes
compulsory for the firm to dissolute:
(i) Insolvency of Partners
In case all the partners or all the partners except one become insolvent.
(ii) Unlawful Business
In case the firm is engaged in more than one business which may have become unlawful, the better view
appears to be that the firm will not dissolve as to the other legitimate businesses unless all of them are so
inter connected that stoppage of one would paralyze the others e.g. A and B charter a ship to go to foreign
port and receive a cargo on the joint venture. War breaks out between England and the country where the
port is situated before the ship arrives at the port, and continues until after the time appointed for loading.
The partnership between A and B is dissolved
3. Dissolution on the happening of contingent event (S.4)
A firm may be dissolved on the happening of any of the following contingent event
(i) Expiry of Fixed Period
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A firm constituted for a term is of course not exempt from dissolution by any of the other possible cause
before the expiration of the term. The contract may expressly provide that the partnership will determine
in certain circumstances but even if there is no such express term, an implied term as to when the
partnership will determine may be gathered from the contract and the nature of the business. The
provision of this section make it clear that unless some contract between the partners to the contrary is
proved, the firm, if constituted for a fixed term would be dissolved by the expiry of that term.

(ii) On achievement of specific task

A partnership constituted to carry out contracts with specified persons during a particular season would be
taken to be dissolved once the contracts are closed. In the case of Basantlal Jalan v.hiranjilal, Where the
firm was constituted for a specific undertaking to supply certain quantity of grain and the contract was
prematurely terminated after supply of a part of the goods, it was held that the partnership did not come to
an end and was dissolved only on the final realization of the assets

(iii) Death of Partner

When the deed of partnership did not provide that the death of a partner would not dissolve the
partnership, the partnership stood dissolve on the death of a partner. Firm, stands dissolved automatically
on death of one partner. Continuance of business after such death would not tantamount to continuance of
earlier partnership.

(iv) Insolvency of Partner

In the absence of a contract to the contrary, the insolvency of any of the partner may dissolve the firm.
The rule shall apply even though the partnership has been constituted for a fixed term and the term has
not yet expired or has been constituted for particular venture and the same has yet not been completed.

(v) Resignation of Partner

Resignation by any of the partners dissolves the partnership

4. Dissolution by notice (S.43)

In case of partnership at will, a partner can dissolve it by giving written notice of dissolution to other
partners duly signed by him. Notice must be very clear and certain. A notice once given cannot be
withdrawn without the consent of other partners was held in case of Banarsidas v. Kanshi Ram. In those
cases where a partner has given notice of dissolution at a time when dissolution will give him some
advantage over the other partners, he may be held in the firm till the pending transactions are completed.

Dissolution by Court (S 44)

The court may order for the dissolution of the firm on the following grounds:-
(i) Insanity of Partner
On the application of any of the partner, court may order for the dissolution of the firm if a partner has
become of an unsound mind. Lunacy of a partner does not itself dissolve the partnership but it will be a
ground for dissolution at the instance of other partners. It is not necessary that the lunacy should be
permanent. In the case of a dormant partner the court may not order dissolution even on the ground of
permanent insanity, except in special circumstances.

(ii) Incapacity of Partner

If a partner has become permanent in capable of discharging his duties and obligations then court may
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order for the dissolution of firm on the application of any of the partner. where a partner is imprisoned for
a long period of time the court may dissolve the partnership was held in case ofWhitwell v. Arthur

(iii) Misconduct of Partner

If any partner other than partner suing is responsible for any loss to the firm, which amounts to
misconduct and prejudicially affects the carrying on of business then the court may order for the
dissolution of the firm.

(iv) Constant breach of agreement by partner

the court may order for the dissolution of the firm if the partner other than the suing partner is found
guilty for constant breach of agreement regarding the conduct of business or the management of the
affairs of the firm and it becomes impossible to continue the business with such partner.

(v) Transfer of Interest

when any of the partner other than the suing partner transfers whole of its share to the third party for
permanently.

(vi) Continuous Losses

the court may order for dissolution if the firm is continuously suffering losses and there is no more capital
available for the future growth of the firm.

(vii) Just and Equitable

The court may order for dissolution on any other ground which court think is just, fair and equitable. e.g.
loss of total confidence between the partners was held in case of Havidatt singh v. Mukhe Singh
Liability for acts of partners done after dissolution ( S.45)
This section provides that despite dissolution, the partners cannot escape their liability to third parties for
acts done even thereafter unless public notice of dissolution is given. These provision emphasis the
necessity of giving a public notice before a partner could terminated his future liability whether it is a case
of dissolution, retirement or expulsion.
Rights of partners to have business wound up after dissolution (S.46)
On the dissolution of a firm every partner or his representative is entitled, as against all the other partners
or their representatives, to have the property of the firm applied in payment of the debts and liabilities of
the firm, and to have the surplus distributed among the partners or their representatives according to their
rights.
Continuing authority of partners for purposes of winding up ( S.47)
After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights
and obligations of the partners continue notwithstanding the dissolution, so far as may be necessary to
wind up the affair of the firm and to complete transactions begun but unfinished at the time of the
dissolution, but not otherwise:

PROVIDED that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent;
but this proviso does not affect the liability of any person who has after the adjudication represented
himself or knowingly permitted himself to be represented as partner of the insolvent.
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Mode of settlement of accounts between partners (S.48) settling the accounts of a firm after
dissolution, the following rules shall, subject to agree
(a) Deficiencies of capital
When a partnership is dissolved, and after the debts to the third parties have been paid and advances made
by a partner have been repaid, the assets are insufficient to repay each partner his capital in full, any
deficiencies must be borne by the partners in the same proportion as the profits would have been divided
(b) The assets of a firm are to be applied in paying
1. Joint debts to third parties
2. Advances, as distinguished from capital, of each partner
3. to each partner what is due from the firm to him in respect of capital.
In after the above payments are made, there is surplus, that surplus is to be divided in the proportion.
Nowell v. Nowell in this case A and B trade as partners and it is agreed that profits should be shared and
losses borne equally. On dissolution it is found that A has advanced more capital than B to the extent of
Rs.1900. the net assets were only Rs.1400. there is thus a deficiency of capital to the extent of Rs500.
Under sub section (a) both the partners must contribute in the proportion in which they have agreed to
share profits that is equally. Therefore B should pay to A sum of Rs 250.

Payment of firm debts and of separate debts ( S.49)

Where there are joint debts due from the firm, and also separate debts due from any partner, the property
of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any
surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him.
The separate property of any partner shall be applied first in the payment of his separate debts, and the
surplus (if any) in the payment of the debts of the firm.
Personal profits earned after dissolution (S.50)
Where a partner, after dissolution and before the affairs of the partnership are wound up, derives any
personal profit for himself from any transactions of the firm, or from the use of the property or business
connection of the firm or the firm name, he shall account for the profit and pay his share to the surviving
partner or the representative of the deceased partner. But if a partner carries on another business of a
similar nature, this section would not apply.

Proviso – Where on dissolution a partner has bought the goodwill of the firm, he may use the firm name
even before the affairs of the partnership have been completely wound up. Clements v. Hall In this case A
and B carry on business in partnership. The firm holds leasehold for the purpose of the business. A
dies.before the affairs of the firm are completely wound up, the lease expires and B renews it. The
renewed property is partnership property.
Alder v. Fouracare. In this case A,B and C are partners. A agrees to take a lease in his own name, but in
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fact fact partnership purpose, and dies before the lease is executed. The representative of A cant deal with
lease without the permission of B and C

Return of premium on premature dissolution ( S.51)

Where a partner has paid a premium on entering into partnership of a fixed term, and the firm is dissolved
before the expiration of that term otherwise than by the death of a partner, he shall be entitled to
repayment of the premium or of such part thereof as may be reasonable, regard being had to the terms
upon which he became a partner and to the length of time during which he was a partner, unless-
(a) the dissolution is mainly due to his own misconduct, or
(b) the dissolution is in pursuance of an agreement containing no provision for the return of the premium
or any part of it.
Airey vs. Barbam in this case A and B entered into a partnership for five years. A paid premium to B. The
partnership was dissolved with into two years as a result of mutual disagreement due to A’s failure to
devote time to business as agreed. It was held that no part of premium was payable because the
dissolution has been caused by the misconduct on the part of A
Atwood v. Maude In this case A and B entered as solicitors for a term of seven years.A paying a premium
of Rs.800.B before entering into the partnership know that A was inexperienced and incompetent. After
the expiration of two years B complained that A’s incompleteness was injuries to business and called him
to dissolve the partnership. A thereupon filed a suit for repayment of proportionate premium. A succeed.
Pease v. Hewitt In this case A and B become partners for 10years. A paying B a premium of Rs1000. A
quarrel occurs at rhe end of eight years, both parties being in the wrong and dissolution is decreed. A is
entitled to a return of Rs.200.

Rights where partnership contract is rescinded for fraud or misrepresentation

Where a contract creating partnership is rescinded on the ground of the fraud or misrepresentation of any
of the parties thereto the party entitled to rescind is, without prejudice to any other right, entitled-
(a) Lien on surplus assets- He has a right of lien on the surplus assets which are left after the debts of the
firm have been paid. The right can be used with regard to sums paid by him for purchasing share in the
firm or for the capital contributed by him.
(b) Right of subrogation- The partner who is rescinding a contract has a right to become creditor of the
firm for the payments which he makes out of his personal assets to payoff the debts of the firm
(c) Right to be indemnified- The partner rescinding the contract has a right to be indemnified by the
partner or partners guilty of the fraud or misrepresentation against all the debts of the firm.
Right to restrain from use of firm name or firm property ( S.53)
After a firm is dissolved, every partner or his representative may, in the absence of a contract between the
partners to the contrary, restrain any other partner or his representative from carrying on a similar
business in the firm name or from using any of the property of the firm for his own benefit, until the
affairs of the firm have been completely wound up.
Proviso – Where on dissolution a partner has bought the goodwill of the firm, he may use the firm name
even before the affairs of the partnership have been completely wound up.
Agreements in restraint of trade (S.54)
Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of
them will not carry on a business similar to that of the firm within a specified period or within specified
local limits; and notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of
1872), such agreement shall be valid if the restrictions imposed are reasonable.

Sale of goodwill after dissolution (S.55)

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(1) In settling the accounts of a firm after dissolution, the goodwill shall, subject to contract between the
partners, be included in the assets, and it may be sold either separately or along with other property of the
firm.
(2) Rights of buyer and seller of goodwill-Where the goodwill of a firm is sold after dissolution, a partner
may carry on a business competing with that of the buyer and he may advertise such business, but, subject
to agreement between him and the buyer, he may not-
(a) use the firm name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before its dissolution.
(3) Agreement in restraint of trade—Any partner may, upon the sale of the goodwill of a firm, make an
agreement with the buyer that such partner will not carry on any business similar to that of the firm within
a specified period or within specified local limits and, notwithstanding anything contained in section 27
of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are
reasonable.
Curt Brothers Ltd. V. Webster in this case A sells the goodwill of his business to B and sets up a new
business. X who remains customer of the old firm deals his own accord with the new firm set by A. A is
not entitled to solicit even such a customer as X, though if X continues to deal with A of his own accord,
A would be entitled to deal with him

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 certain matters with regard
to the company and to be elected to a seat on the board of director

If the company is getting liquidated and its assets are sold, the shareholder may receive a portion
of that money, provided that the creditors have already been paid. When such a situation arises,
the advantage of being a stockholder lies in the fact that they are not obliged to shoulder
the debt and financial obligations incurred by the company, which means creditors cannot compel

stockholders to pay them.

Roles of a Shareholder

Being a shareholder isn’t all just about receiving profits, as it also includes other responsibilities.
Let’s look at some of these responsibilities.

 Brainstorming and deciding the powers they will bestow upon the company’s directors,
including appointing and removing them from office
 Deciding on how much the directors receive for their salary. The practice is very tricky
because stockholders must make sure that the amount they will give will compensate for
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the expenses and cost of living in the city where the director lives, without compromising
the company’s coffers.
 Making decisions on instances where the directors have no power over, including making
changes to the company’s constitution
 Checking and making approvals of the financial statement of the company

Types of Shareholders
There are basically two types of shareholders: the common shareholders and the preference
shareholders.

Common shareholders are those that own a company’s common stock. They are the more
prevalent type of stockholders and they have the right to vote on matters concerning the comp ny.
As they have control over how the company is managed, they have the right to file class of
action against the company for any wrongdoing that can potentially harm the organization.

Preferred shareholders, on the other hand, are more rare. Unlike common shareholders, they
own a share of the company’s preferred stock and have no voting rights, or any say in the way the
company is managed. Instead, they are entitled to a fixed amount of annual dividend, which they
will receive even before the common shareholders are paid their part.

Though both common stock and preferred stock see their value increase with the positive
performance of the company, it is the former that experiences higher capital gains or losses.
Can the Shareholder be a Director?

The shareholder and director are two different entities, though a shareholder can be a director at
the same time.

The shareholder, as already mentioned, is a part-owner of the company and is entitled to privileges
such as receiving profits and exercising control over the management of the company. A director,
on the other hand, is the person hired by the shareholders to perform responsibilities that are related
to the company’s daily operations, with the intent of improving its status.

Shareholder vs. Stakeholder

The two terms are often used interchangeably, with many people thinking that they are one and
the same. However, the two terms don’t mean the same thing. A shareholder is an owner of a
company as determined by the number of shares they own. A stakeholder does not own part of the
company but does have some interest in the performance of a company just like the shareholders.
However, their interest may or may not involve money.For example, a chain of hotels in the US
that employs 3,000 people has several stakeholders, including its employees because they rely on
the company for their job. Other stakeholders include the local and national government, because
of the taxes the company must pay annually.
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The number of shareholders in a company depends upon the type of company which they are
opening.

 For a one-person company, one person is required.

 For a private limited company, two persons are needed.
 For a public limited company, a minimum of seven persons are required.

Shareholders’ Rights

There are various rights available to a shareholder. Different type of rights has been discussed
below:

Appointment of directors
Shareholders play an important role in the appointment of directors. An ordinary resolution is
required to be passed by the shareholders for the appointment. Apart from this, shareholders can
also appoint various types of directors. They are:

An additional director who will hold the office until the next general body meeting;

 An alternate director who will act as an alternate director for a period of 3 months;
 A nominee director;
 Director appointed in the case of a casual vacancy in the office of any director appointed
in a general meeting in a public company.
 Apart from this shareholder also can challenge any resolution passed for the appointment
of a director in the general body meeting.

Legal action against directors

Shareholders also can bring legal action against director by the rules laid down in the Companies
Act 2013. They are:

 Any act done by the director in any manner which is prejudicial against the affairs of the
company.
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 Any act done which is beyond the law or against the constitution.
 Fraud.
 When the assets of the company are being transferred at an undervalued rate.
 When there is a diversion of funds of the company.
 Any act done in a mala fide manner.

3. Appointment of company auditors

Shareholders also have a right to appoint the company auditors. Under Companies Act 2013, the
first auditor of the company is to be appointed by the board of directors. Further the shareholders
at the annual general body meeting at the recommendation of directors and audit committee. The
appointment is generally done for five years and further can be ratified by passing a resolution in
the annual general body meeting.

4.Voting rights
Shareholders also have the right to attend and vote at the annual general body meeting. Every
company registered in India should comply with the provisions of the Companies Act 2013. It is
mandatory for every Indian company to hold an annual general meeting once in every year. The
meeting can be held anywhere at the head office of the company or any other place as given by
the company. At the meeting, there are various mandatory agendas which are to be discussed.
These include the adoption of financial statements, appointment or ratification of directors and
auditors etc.

When a resolution is brought by members of a company then according to companies act 2013 it
can be passed only by the means of voting by the shareholders. Companies Act 2013 recognizes
following types of voting:

 Voting by the showing of hands – Every member present in the meeting has one vote. So,
in this type of voting shareholders vote just by showing of hands.
 Voting done by polling – In this type of voting the chairman or the shareholders’ demand
for a poll. However, in case of differential rights as to voting, a particular class of equity
shares may also have weighted voting rights.
 Voting done by electronic means– every company who has more than 1000 shareholders
has to put up a facility of voting through online means. Every member should be provided
with the means of voting of online.
 Voting by means of postal ballot– any resolution in the meeting can also be passed by
means of a postal ballot.

A shareholder also has a right to appoint proxy on his behalf when he is unable to attend the
meeting. Though the proxy is not allowed to be included in the quorum of the meeting in case of
voting, it is allowed by following a procedure mentioned in the Companies Act 2013.
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5. Right to call for general meetings

Shareholders have the right to call a general meeting. They have a right to direct the director of a
company to can all extraordinary general meeting. They also can approach the Company Law
Board for the conduction of general body meeting, if it is not done according to the statutory
requirements.

6. Right to inspect registers and books

As shareholders are the main stakeholders in a company, they have the right to inspect the accounts
register and also the books of the firm and can ask questions about the same if they feel so.

7. Right to get copies of financial statements

Shareholders have the right to get copies of financial statements. It is the duty of the company to
send the financial statements of the company to all its shareholders either in a quarterly or annual
statement.

8. Winding up of the company

Before the company is wound up the company has to inform all the shareholders about the same
and also all the credit has to be given to all the shareholders.

Other Shareholders’ Rights

 When the sale of any material of any company is done then the shareholders should get the
amount which they are entitled to receive;
 When a company is converted into another company then it requires prior approval of
shareholders. Also, all the appointment has to be done according to all the procedures and
also auditors and directors have to be done;
 Right to approach the court in case of insolvency.

Shareholders’ Duties
There are also responsibilities and duties of shareholders which they should perform. Besides
several rights which they have, there exists several duties. They are:

 Shareholders should participate in the general body meetings so that they can see and also
can advise on the matters which they feel is not going good.
 Shareholders should consult on the matters of finance and other topics.
 Shareholders should be in touch with other members of the company so that they can see
the work progress of the company.

Why we prefer the preference shareholder to common shareholder?

The chief benefit of preferred shares for investors who hold them is that they get paid dividends
before common shareholders among the benefits for companies is a lack of shareholders voting
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rights which is a drawback for investors issuing companies face a higher cost for this type of
equity when compared to debt