The ordinary shareholders are having the following rights in respect of shares held by them:
1. Right to vote:
As the ordinary shareholders of a company are its owners, they are entitled to elect the board of directors. The board, in turn, select the management and management actually controls the operations of the company. This right to vote is not confined to mere election of directors; however, it covers a large number of issues like the amendment of memorandum of association or articles of association, adoption of the schemes of consolidations and mergers, alteration of the authorized capital, etc.
2. Right to income:
The ordinary shareholders are entitled to share in the earnings of the company only if cash dividends are paid. The declaration of cash dividends depends entirely upon the board of directors. This aspect reveals the basic difference between the rights of an ordinary shareholder and rights of a creditor. In case the company fails to pay the contractual interest and principal repayments the creditors can take legal action to assume that payment is made or the company is liquidated. Ordinary shareholders, on the other hand, have no legal recourse to a company for not declaring cash dividends or for not distributing the profits. They are entitled for cash dividends only when it is recommended and declared by the board of directors. However, if the management, the board of directors or both are engaged in fraud in not declaring cash dividends the shareholders can take their case to the court and force the company to pay the dividends.
3. Right against ultra vires acts of the company:
The management or board of directors is empowered to carry on only such acts or operations specified in the memorandum of association of a company. If they perform any act or operation beyond this memorandum is considered as ultra wires acts. These ultra wire acts are a breach of the agreement between the company and the shareholders. Therefore, a...
...Rights of Shareholders.
A shareholder is an individual or company that legally owns one or more shares of stock in that company. Shareholders are the owners of companies. A small business may have just one shareholder, the founder, while a public company may have thousands of individual and institutional shareholders, such as mutual fund companies, pension funds and hedge funds. Shareholders play an important role in the financing, operations, governance and control aspects of a business.
Shareholders or stockholders are the persons or firm or companies who purchase the shares of other company. They are the real owner of company. Shareholders may be preference shareholders or equity shareholders.
Equity shareholders can vote in annual general meeting for passing any resolution. Other side Preference shareholders have preference to get dividend with fixed rate before giving dividend to equity shareholders. All shareholders have to open demat account if they want to deal in shares. As shareholders are the real owner of company, if company suffers loss then shareholders have no right to get dividend. If company is liquidated, then they can receive their money only after...
...Requirements for Valid Action at a Shareholder Meeting
* Read statute, bylaws and articles
* 1. Authority for the meeting
* 2. Proper notice (or waiver of notice)
* 3. Quorum
* 4. Required number of votes cast in favor
1. Authority for Meeting
* The meeting must be authorized
* Look to statute and bylaws for authorization
* Annual meetings MBCA §7.01
* Special meetings MBCA § 7.02
* Court ordered meetings MBCA § 7.03
* Who may call a special shareholders meeting?
2. Proper Notice
* See MBCA § 7.05; Del. § 222
* a) Must the meeting notice state the purpose of the meeting?
* Annual meeting MBCA § 7.05(b)
* Special meeting MBCA § 7.05(c)
* NOTE: A number of provisions in the applicable corporation statute will contain special notice provisions. See, e.g., MBCA §10.03(d)
* b) Who is entitled to notice?
* generally only shareholders entitled to vote MBCA § 7.05(a)
* only shareholders on record date MBCA § 7.07; Del. § 213
* Note: In some cases shareholder who are not entitled to vote are entitled to notice. See, e.g., MBCA §§ 10.03(d) & 11.04(d).
* c) What about electronic notice?
* See MBCA § 1.41(c); Del. § 232
* d) Can notice be waived?
* Notice (or a defect in a notice) may be waived expressly or by...
...To: Joe Brock
From: Sue Smith, CPA
Subject: Minority ShareholderRights
Joe Brock is a minority interest shareholder in Big Corporation. Leslie Ross is a shareholder that owns less than 50% of the voting shares, but has the majority of the voting shares and thus has taken control of the corporation. According to SFAS 94, due to this control, Leslie Ross must consolidate his interest with Big Corporation. Mark Jones, a minority shareholder, is in a position of management for the company. Joe Brock is unhappy with Mr. Jones’ decisions and would like to challenge his authority.
Determine what factors arise in considering if a minority investor can make maintain such control or what can be done to prevent others from exercising control of the corporation.
Though Leslie Ross holds a majority of the voting interest, ASC 810-10-15-10 states that if the minority investors hold substantive participating rights, the majority investor is limited and therefore is not in “control” of the corporation and the majority owned subsidiary may not be consolidated. If the minority investors hold only protective rights, Leslie Ross is considered in control of the corporation and the majority owned subsidiary should be consolidated.
If the minority investors hold participating rights, Leslie Ross is in control and has the authority to...
This paper examines "Rights and Protection of the Interest of the Minority Shareholders" I will discuss the recent development, issues and legal practices in the subject in Bangladesh perspective as well as international. Rights of Minority Shareholder and protection of their rights is now talked topics as new problems are emerging regarding the issues. A few initiatives have taken by national level and problems are gradually increasing, therefore some recommendation has been prescribed in the paper.
There are various problems founds in Bangladesh in order to enforcing the rights and interests of minority shareholders. Minority shareholder are oppressed and neglected due to the system of controlling trend by the family members who owned the company and controls the company. Therefore rights of those minority shareholders become unprotected. Thus a gradual attention is growing up and more importance and emphasizes has to be given to protects the rights of the minority shareholders.
2.Defining Minority shareholder
Minority shareholder is a shareholder who owns less than 50 percent of the total shares of a corporation’s stock. A minority shareholder does not have the voting...
Definition of makjor shareholder
A single shareholder who controls more than half of a corporation's outstanding shares, or sometimes, one of a small group of shareholders who collectively control more than half of a corporation's outstanding shares.
Read more: http://investorwords.com/2922/majority_shareholder.html#ixzz2qAKIYa6Q
Majority shareholder is a shareholder who owns and controls most of a corporation’s stock. Only those persons who own more that 50 percent of a company’s shares can be a majority shareholder. Generally, a majority shareholder has more power than all of the other shareholders combined. S/he also has the authority to do things that other shareholders do not have, such as replacing a corporation’s officers or board of directors. Majority shareholder is commonly seen in private companies rather than public companies.
In Crosby v. Beam, 47 Ohio St. 3d 105 (Ohio 1989), the court held that “Majority shareholders have a fiduciary duty to minority shareholders. A majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at the expense of corporate interests.” The court further observed that “Majority or controlling shareholders breach the fiduciary duty to minority shareholders when...
Majority shareholders own more than half of outstanding shares in the company whilst minority shareholders own less than 50% of the share capital. Majority shareholders are usually also the directors of the company. They in effect control the operations of the company and their actions may be to their benefit. The law therefore, in light of this possibility provides various legal remedies available to the minorityshareholder.
In this case Ergan, Arif and Moshe the minority shareholders are unhappy with Pedro and Morgan. However, they might not be able to bring any action against Pedro and Morgan because the doctrine of separate legal personality enables the company to sue and be sued by a member or a third party. Moreover, the wishes of the majority as expressed through votes at properly conducted meetings should always reign over the wishes of the minority. In Foss v harbottle case, action was brought by two shareholders against the alleged fraudulent and illegal transactions by the company’s directors and to make up for the resultant loss to the company. It was held that since the loss was to the company, only the company could bring an action and not the minority shareholders. The rule established in this case was that where the company suffers harm, only the company itself is the true and proper claimant. This principle was further supported by the ruling in...
...1. What is a share? (1 mark)
2. Identify two advantages of a private placement of shares as compared with a public issue. (1 mark)
3. The shareholders of Quinninup Ltd hold 25 000 A class ordinary shares, fully paid at $4.50 each. On 17 April 2012, the company directors voted to make a 1 for 5 rights offer to these shareholders. The additional shares were offered at $1.75 each, payable in full one month after acceptance.
The offer closed on 31 May 2012 with 90% of the shareholders accepting. Shares were duly allotted on that date and all monies were received when due.
Prepare journal entries to record these events, show all workings. (2 marks)
4. Forrest Ltd has issued 10 000 5% cumulative preference shares. Explain the meaning of the term “cumulative”. (1 mark)
5. The share capital of Murdoch Ltd consists of:
52 000 Ordinary A shares @ $2.50, fully paid $130 000
15 000 Ordinary B shares @ $1.50, paid to 80c 11 000
On 28 June 2012, the directors declared a 7c per share final dividend. Shareholder approval is not required to pay dividends.
Prepare the journal entries to record the dividend, show all workings. (2 marks)
6. Eyre Ltd’s share capital consists of 65 000 ordinary shares of $2.30 each, fully paid. On 17 February 2012 the directors offered these shareholders the right to acquire one...
...Maximizing Shareholder Value: The Role of the Financial Manager
Today's business world shows a huge diversification in the shareholders of one company. In most countries, each investor only holds a very small fraction of issued shares by one corporation. This includes also the senior management.
Determining the objectives of the firm is not necessarily a straightforward task because the typical firm will have many types of participants. Among these participants are shareholders, creditors, managers, employees, customers, suppliers, governments and a variety of special interest groups. The objectives of these different types of participants are likely to be in conflict.
But the main focus and objective of every firm and its members should be maximizing value. But whose value should be maximized? It should be shareholders value. The main conflict comes when other members of the firm or other stakeholders try to maximize their own expected wealth. That objective could not be aligned with the main objective of the firm. For example, a manager that runs a not so profitable department will lobby for allocation of funds to his department, even if he knows that those funds could be better off in other department.
Shareholders and the board of directors (designated by shareholders) appoint the management team that will be in charge of managing the firm in the most efficient way and...