Shares are one of the most popular markets today and it’s not a surprise why. This market attracts all sorts of traders and investors whether you’re a newbie or have been around for quite some time now. And without a doubt, this market is also one of the safest and most lucrative ones for investing.
But before jumping right in, there are certain things you need to know before investing in shares–one being, what entails being a shareholder. It might seem simple, yes you own a fraction of a company, but it’s way more than that.
Before you invest in any shares, you need to know the rights that come with being a shareholder and we got you covered! Below are the 8 common shareholder rights you need to know:
1 – The right to vote
As a shareholder, you get the right to vote on certain company matters such as governance and directions. Your vote is an important part of any of the company’s decisions such as (1) the election of the board of directors, (2) the change of the company’s bylaws, (3) the approval of corporate transactions, (4) executive compensation, (5) policy changes, (6) stock options and more.
But depending on the number of shares you own, it also affects the number of votes you have. Thus, shareholders who own a larger percentage of the company’s shares will have more voting influence and authority over corporate decisions. However, certain businesses could have various share classes with various voting rights.
2 – Subject to dividend rights
Once you become a shareholder, you are now entitled to receive dividends. And if you’re wondering, what are dividends? Well, these are the portions of the company’s profits that are given and distributed to shareholders. But not all dividends rights are the same, it may still vary depending on the type or share that’s held and the company.
There are actually various kinds of dividends like cash dividends, stock dividends and so on. So depending on what you and the company agreed on, it may vary.
3 – The right to information
The right to information about the company is guaranteed to all shareholders. This includes but is not limited to, financial statements, annual reports, and other pertinent disclosures that are essential for giving shareholders the information they need to make wise investment decisions.
Companies also provide shareholders with more information in addition to their financial statements and annual reports. Disclosures on executive compensation, risk factors, legal changes, and significant occurrences that could influence business operations or financial standing may fall under this category.
4 – Preemptive rights
Shareholders might have the option to acquire more shares prior to when they are made available to outside investors in some jurisdictions. This safeguards the ownership stake of current stockholders.
5 – The right to sue
If shareholders think their rights have been infringed or the company has participated in illegal practices, they have the ability to file a lawsuit, either individually or collectively, towards the company or its directors.
6 – The right to inspect
In order to maintain accountability and transparency, shareholders frequently have the opportunity to review company books and records. This may entail having access to shareholder registrations, meeting minutes, and other pertinent records.
7 – The right to attend meetings
The ability to attend general meetings, especially annual general meetings. This allows shareholders to take part in discussions, present concerns, and exercise their right to vote privileges. To give you an idea of meeting you can attend as a shareholder, here are the 2 major types:
- Annual general meetings (AGMs)
- Extraordinary general meetings (EGMs)
8 – The right to transfer shares
Subject to any limitations outlined in the bylaws of the company or shareholder agreements. Shareholders typically have the right to sell or transfer their shares to third parties. Shareholders are allowed to sell, give away or transfer their shares to anyone or anything who wants to buy them.
A crucial component of share ownership is the ability to transfer shares. Which enables owners to realise the worth of their investment or decide strategically about their shareholdings.
So if you ever catch yourself wondering “How to trade shares the proper way?” The best way to start is by learning everything you can about it. For more details on shareholder rights, it is advised to speak with legal and financial experts or to research the relevant laws in your country.