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What are the primary rights of a shareholder?

On Behalf of | Mar 18, 2024 | Business Litigation

Investors or shareholders often have vital roles in determining what happens to the business’s future. They usually have no involvement in a company’s daily operations but are contributors when making significant business decisions. Whether changing the business’s direction or making vital board decisions, shareholders can influence the outcome.

Aside from decision-making, they have other rights concerning their ownership and other parts of the business. Violating these rights can lead to disputes between shareholders or against the company. They can vary from state to state, but these rights usually include the following:

  • Right to vote on significant issues, such as choosing directors and making business changes, which can occur during annual meetings
  • Right to own part of the business with corresponding value, varying based on the business’s valuation, which can fluctuate over time
  • Right to transfer their ownership or trade stocks
  • Right to receive dividends based on their arrangement with the board of directors
  • Right to access and view company records or documents, including financial paperwork, bylaws and other files
  • Right to sue against unethical or wrongful behavior and misconduct

Each company could also have unique policies and plans regarding their shareholders, which can affect what kind of treatment they would receive from the business.

Taking legal action as a shareholder

Both company leaders and shareholders should know these rights to manage the business appropriately. Additionally, shareholder disputes can stem from violating these rights, which may require legal action or going to court altogether. 

Regardless of who is at fault, shareholders can protect themselves by understanding their rights and addressing incidents that violate them. Still, resolving issues may require thoroughness and strategy, which can make legal guidance beneficial.