Public companies typically raise money by selling shares to investors. A shareholder is an individual or entity that has an ownership interest in a company. And although shareholders don’t typically engage in the day-to-day operations of the organization, they do have some rights and obligations. In this article, we examine shareholder right and responsibilities.
Shareholder Rights
A shareholder’s rights depend on several factors, including the type of shares, the constitution of the company, and the provisions of the shareholder agreement. Despite this, there are some rights that are common to all shareholders, including:
Right to access financial documents: As company owners, shareholders have the right to access the financial records of the company. The purpose of this right is to give shareholders the ability to review and assess the financial condition of the company. Public companies typically provide access to this information to shareholders through financial statements and reports.
Right to sue for negligence: Shareholders also have the ability to sue company executives and directors for misconduct, including misdeeds by directors and other company officials.
Right to vote: One of the most valuable shareholder rights is the right to vote. This right allows shareholders to participate in the corporate decision-making process. The voting rights of shareholders include the right to make recommendations, select directors, and vote on institutional changes.
Right to participate in meetings: Public companies hold annual meetings for shareholders. During these meetings, the directors of the organization present the company’s annual report to shareholders. In addition, shareholders have the opportunity to negotiate the remuneration of the company’s directors, elect new directors, and discuss the state of the business with leadership.
Right to transfer ownership: Shareholders also have the right to exchange their equity or interest. This is important because it gives shareholders the ability to easily and quickly exchange their shares for cash.
Shareholder Responsibilities
Fortunately, shareholder liabilities are limited. For example, since the company is its own legal entity, shareholders are not liable for the company’s legal responsibilities. As a result of this, the assets of the company are not the property of the shareholders. In addition, shareholders are only entitled to their own interests in the company, and they aren’t responsible for the company’s debts. However, when a company is liquidated, shareholders are not entitled to collect compensation until creditors and bondholders have been paid. Generally, the only liability a shareholder has to a company is to compensate the corporation for shares purchased.
Contact a Florida Corporate and Business Law Attorney
If you need help with your corporate or business legal needs, the law firm of Gueronniere, P.A., is here to assist you. When you come to us for help with corporate or shareholder matters, experienced corporate and business law attorney Grace de la Gueronniere will examine the facts of your situation and devise an effective legal strategy to address your situation. Please contact us to schedule a confidential initial consultation with our experienced Florida corporate and business law lawyer.