Rights of Share Holders’ of a Company

P.Geetha
Office
Administrator

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
 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
Common Shareholders' Six Main Rights

1. Voting Power on Major Issues

This includes electing directors and proposals

for
changes affecting the company such
fundamental
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.

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.

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.

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.

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.

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.
 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.

 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.
 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.

 Duties of Share Holders
1. Changes to the constitution of the company
2. Declaring a dividend
3. Approving the financial statements of the company
4. Winding up of the company by way of voluntary liquidation
5. The shareholders of any company have a responsibility to ensure
that the company is well run and well managed. They do this by
monitoring the performance of the company and raising their
objections or giving their approval to the actions of the
management of the company
 THANK YOU

EscrowTech India Private Limited