What are the rights of shareholders?

RIGHTS OF SHAREHOLDERS.

Ans.    In a common, the term ‘shareholder’ means a person who has bought share/s- equity or preference, of a company. A shareholder is treated as a real owner of the company as he has contributed towards the capital of a company. Being the owner of the company, he enjoys ownership rights. All shareholders of a company collectively appoint their representatives called as Board of Directors to manage the affairs of the company on their behalf.

As the owner of the company the shareholders enjoys various rights. These rights may be classified as,

1.      Rights of shareholders :

a)        Statutory Rights

b)        Documentary Rights

c)        Other Legal Rights

Statutory Rights are Rights given to shareholders by the Companies Act, 1956. These rights cannot be amended or taken away from shareholders in any manner. For eg. To receive dividend, get copy of Memorandum and Articles of association, statutory and annual reports, notices of general meetings, transfer shares, demand poll, etc. are some of the statutory rights of shareholders.

On the other hand, documentary rights are rights conferred upon by Articles of Association of a company viz to vote at meeting of shareholders, receive dividend, get copies of certain documents after paying nominal fees etc. are documentary rights.

The rights shareholders enjoys as per the general law of the company is include under ‘other legal rights’. Eg. Amend Memorandum or Articles of a company, get equal treatment by board, inspect certain records of company, take legal action and prevent unauthorized acts of company etc.

The rights of shareholders may also be categorized as

2.      Rights of shareholders :

a)        Individual Rights

b)        Corporate/ Collective Rights

          Individual Rights refer to rights enjoyed by a shareholder as an individual (owner) of the company. He can enforce this right singly. For eg. Right to receive share certificate, inspect Register of members, attend general meetings etc.

Corporate / collective rights are rights enjoyed by shareholders jointly or collectively and not individually. These are rights enforced by the majority usually in the general meetings. They include right to alter memorandum or Articles of Association, elect directors, etc.

In a nutshell, following are the rights of shareholders of a Company:

1.      To receive copies of Memorandum and Articles of Association, certain resolutions, records etc. free of cost or on payment of prescribed fees, as the case may be.

2.      To receive share certificate within 3 months of allotment or within 2 months from date of transfer of shares.

3.      To receive notice and agenda of general meeting along with relevant reports like annual reports, auditor’s reports, statutory report or explanatory notes, as the case may be.

4.      To transfer shares subject to provisions of Articles.

5.      To be offered preferential right to purchase shares on a pro-rata basis in case of further issue of shares. He also can announce all or part of shares on such issues.

6.      To inspect Register of Member, annual return, register or charges, books of accounts etc. and also can get a copy of these on payment of prescribed fees.

7.      To appoint proxy.

8.      To demand poll.

9.      To participate in the process of appointing (and reappointing) directors and auditors and also can remove director before expiry of his term.

10.    To declare and receive dividend

11.    To participate in surplus assets of the company, if any, on its winding up.

12.    To apply to company law board.

a)      For rectification of Register of member

b)      For seeking redressal when company has refuses his application for transfer of his shares.

c)      For asking its approval to call for AGM, if company fails to hold such meeting within the prescribed time limit.

d)      For convincing extra ordinary general meeting, under certain circumstances.

e)      For seeking in case of oppression and mismanagement.

f)       For asking it to investigate the affairs of the company

13.    To petition the high court for winding up of the company, under certain circumstances.