Rights and Duties of Shareholders Under Companies Act,2013 by Samidha Hegde@Lexcliq

Introduction-

Shareholders have ownership interest in the Company. Shareholders are the owners of the company and the shares they hold are like the slices of Company. Equity shareholders enjoy certain rights and liabilities even if shareholders do not partake in the day-to-day operations of the Company.

Types of Shareholders-

  • Equity Shareholders-

Equity shareholders are the main stakeholders and are involved in major decisions of the Company as they hold voting rights. But at the time of dividend distribution Preference shareholders are given priority over Equity Shareholders.

  • Preference Shareholders-

Preference shareholders hold no voting rights in the Company. They receive fixed dividends, generally larger than those paid to common stockholders, and their dividends are paid before common shareholders.

 

Rights of Shareholders

 A shareholder in a company is entrusted with various rights to maintain their position and to prevent any kind of suppression from any member of the company. Some of those rights are as follows:

 

  • Right to Vote:

Right to vote is one of the most important rights given to a shareholder.  Companies Act 2013 recognizes the following types of voting: Voting by showing hands, Voting is done by polling, voting is done electronic means, voting is done through postal ballot.

 

This right enables shareholders to participate in corporate decision-making. Their voting power includes the right to appoint directors, the right to make proposals, the right to vote for structural changes such as mergers and acquisitions, or liquidation.

Following a procedure mentioned in the Companies Act 2013, the shareholder also has a right to appoint a proxy on his behalf when he is unable to attend the meeting. Though the proxy is not allowed to be included in the quorum of the meeting in case of voting.

·         Right to access financial records

As owners of the company, shareholders have the right to inspect a company’s books and records. This is so that the shareholder knows how well the company is doing. The company may do this by providing audited financial statements or financial reports to the shareholders.

·         Right to sue for wrongful acts

Shareholders have the right to sue directors and executives for wrongful acts. This include misdeeds of directors and other officers.

·         Right to attend the Annual General Meeting (AGM)

The Annual General Meeting (AGM) is an annual gathering of a company’s shareholders. Here, the directors of the company presents the shareholders the company’s annual report and comment on its performance over the year. During the AGM, shareholders may elect new directors, discuss directors remuneration, and ask questions regarding the company moving forward.

·         Right to transfer ownership

Shareholders of publicly listed companies have the right to trade their ownership interest or shares on the ASX. This is important as shareholders are able to quickly exchange their shares into money. The liquidity a share provides is very important.

Duties of Shareholders

  1. Duty to be in touch with other members of the company so that they can see the work progress of the company.
  2. Shareholders are not entitled to anything except for their ownership interest in the company.
  3. Shareholders should consult on the matters of finance and other topics.
  4. Shareholders are also not responsible for the company’s debt. However, if a company is liquidated, creditors are first in line to have their debts paid, then bondholders, and then common shareholders. However, an exemption to this is that a shareholder is liable to pay the company for any amount unpaid on their shares.
  5. Shareholders should participate in the general body meetings so that they can see and also can advise on the matters which they feel is not going well.

 

 

References-

https://indianlawportal.co.in/rights-liabilities-of-shareholders/

https://lawpath.com.au/blog/shareholders-rights-and-responsibilities-a-guide

https://thecompany.ninja/rights-of-shareholders/

 

 

 

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