Question

Explain in short what rights the shareholders possess. Are these rights sufficient to ensure control over the corporation?

Answer 1

Shareholders have different kind of rights. They are as follows-

1. Ownership- owning of shares means having a stake in company. Shareholder are deamed to be owners of the company.

2 . Right of voting-shareholders have the right to vote in different decisions the company unless they approve it the decision cannot be undertaken.

3. Right of transferring ownership- shareholders have right to transfer ownership as and when required.

4. Right to inspect corporate documents- shareholders can inspect the corporate documents if they are sceptical about the performance of the company .they can ask the management for different kind of public informations and they will be provided by the management.

5. Right to sue for wrongful acts- shareholders can sue the management if they think that management is operating through fraudulent means by ignoring the interest of shareholders.

6. Right to receive dividend- if approved by the board shareholders have the right to receive. the dividend are the part of the profits which belongs to the shareholder of the company.

No These rights are not sufficient for shareholders to have a substantial amount of control in the organisation because small amount of stake cannot help in making decisions and there are a large amount of retail shareholders who hold a very low proportion of shares so even if they combine all together they cannot impact the decision making process.Shareholders who have a very high proportion of stake in the company can only effect the decision making process of the company as they are highly influential.