Question

In identifying and evaluating best practices in communicating with and responding to stakeholders, it is essential to know their rights.

One such group is the Shareholders (Stockholders).

a)Outline the rationale for legal rights and safeguards of the shareholders

b)Identify and explain six (6) of these rights.

Answer 1

Question a) Rationale for legal rights and safeguards of the shareholders

Shareholders are the owners of a company who invested money in the business. Shareholders are the people who have contributed capital for the establishment of a business so it is very important that businesses protect the interest of shareholders. Director board members are the representatives who are elected by the shareholders for the protection of their interests and rights.

Question b) Rights of shareholders

The following are the basic rights of shareholders.

1.Voting Right

A shareholder will have a right to attend important meetings of a company and to participate in the voting process. Normally one share has one vote. A shareholder will also have a right to demand a poll in crucial organizational matters.

2.Right to Appoint a Proxy

A shareholder will have a right to appoint a proxy to cast his vote if he or she has any inconvenience. Other shareholders have a right to challenge a proxy if he or she does not adhere to the legal requirements to be a proxy.

3. Right to get a share of profit

A shareholder will have a right to get his or her portion of the profit made by a company. This right also can be called as the right to get a dividend.

4.The Right to Sue for Wrongful Acts

If a shareholder feels that his rights are violated he or she has the right to approach the court of law.

5.Right to access company books

All the shareholders have a right to inspect the books and reports of the company.

6.Right to transfer

All the shareholders in a company have a right to transfer the whole or a portion of shares to another person.

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