In: Accounting
A proper balance of the rights of majority and minority
shareholders is essential for the smooth functioning of the
company. Minority shareholders have limited rights to benefit from
the operations of a company, including receiving dividends and
being able to sell the company's stock for profit. In practice,
these rights can be restricted by a company's officers' decision to
not pay dividends or purchase shares from shareholders.
Any shareholder in a corporation, whether public or private, has
certain important rights pertaining to the corporation. Examples of
shareholder rights include the right to vote at annual shareholder
meetings, to review information about the company, including the
company books and records and a list of all shareholders, and to
vote on major corporate events such as selecting directors,
approving mergers, dissolution, major asset sales, and amendments
to the corporate charter documents.In private corporations,
minority shareholders need additional protections against attempts
to improperly exploit the situation. The extent of these additional
rights afforded by state law varies from state to state. Nearly all
states recognize certain minority shareholder rights. In addition,
it may be possible to have your attorney negotiate certain
shareholder rights and remedies specific to your situation and even
have them incorporated into a shareholder agreement.