Equity Shareholders

These are the main stakeholders of a company and during the time of dividend distribution the preference shareholders will get the first.

Preference shareholders 

Preference shareholders would basically have no voting rights because of their preferred status.  They would receive fixed dividends, which is generally larger than those paid to the common stockholders, and their dividends will be paid before common shareholders.

The number of shareholders in a company would depend upon the type of company which they are opening.

·       For a one-person company, a single individual is required.

·       In case of a private limited company, two persons would be needed.

·       In case of a public limited company, a minimum number of seven persons will be required.

Rights of the Shareholders

Various rights have been provided to a shareholder. Rights of the shareholders have been discussed below:

1.    Appointment of directors

They play an important role when appointmenting the directors of the company. An ordinary resolution would have to be passed by the shareholders for appointing directors. Shareholders could appoint different types of directors. These are:

·       An additional director- till the next general body meeting

·       An alternate- director as an alternate director for 3 months period

·       Nominee director;

·       Director appointed for a vacancy in the office of the director appointed in the general meeting of a public company.

Any resolution for the appointment of a director in a general meeting can also be challenged by the shareholders.

2.    Legal action against directors

According to the rules provided under the Companies Act, 2013, a legal action could also be initiated by the shareholders against any director for- 

·       Such act committed by the director which is against the affairs of the company

·       Act committed against the law of the land

·       Fraud.

·       If the assets of the company are transferred at an undervalued rate.

·       If there is a diversion of funds in the company.

·       Act committed in some mala fide manner.

3.  Appointment of the auditors of the company

Shareholders have a right to appoint the company auditors as well as has been provided under the  Companies Act 2013. The appointment would generally done for a period of five years and  could be ratified further by passing a resolution at the annual general body meeting.

4.  Voting rights

Shareholders have the right to attend as well as vote at the annual general body meeting. Each  company which is registered in India must comply with the provisions of the Companies Act 2013. It is mandatory for every Indian company to hold an annual general meeting once in an year. Such meeting could be held anywhere at the head office of the company or any other place decided by the company. Agendas such as adoption of financial statements, appointment or ratification of directors and auditors etc. will be discussed at the meeting. The voting methods followed by the shareholders at such meeting are-

·       Voting by showing of hands – Each member at the meeting will have one vote, hence could vote by merely showing their hands.

·       Voting by polling – the chairman or the shareholders could demand for a voting by poll.

·       Voting done by electronic means– Companies having more than 1000 shareholders could complete the process of voting through online means.

·       Voting by postal ballot– Resolution in the meeting could be passed by the means of postal ballot.

A shareholder will also have the right to appoint a proxy on his behalf in case he is unable to attend the meeting as per the provisions of the Act.

5.  Right to call for general meetings

Shareholders will also have the right to call for a general meeting. They also have a right to direct the director to call such extraordinary general meeting. 

6.  Right to inspect registers and books

As a shareholder is the main stakeholder in a company, he would have a right to inspect the accounts register and could ask questions regarding the same if they feel so.

7.  Right of getting the copies of financial statements

A Shareholder would have a right to get copies of the financial statements. It shall be the duty of the company to send such financial statements to all the shareholders either in every quarter or annual statement.

8.  Winding up of the company

Before winding up, the company would have to inform all shareholders regarding the same. 

Other Rights of the Shareholders

·       After the sale of the products of the company has taken place, the shareholders of the company should get the amount which they are entitled to receive;

·       After a company gets converted into another company, it would require the prior approval of shareholders.

·       Shareholders also have the right to approach the court in case of an insolvency.

Shareholders’ Duties

There are also various responsibilities and duties required to be performed by the shareholders.  These are:

·       Shareholders must be present in the general body meetings.

·       Shareholders must consult about the matters of finance and other topics.

·       Shareholders have to be in touch with other members of the company so that they could  oversee the work progress of the company.

Conclusion

It has to be inferred that the shareholders play an important role in the functioning of the  company. They exercise various rights including those of the appointment of the company’s director, auditor etc., voting rights and also have the right to express their view when the company goes insolvent. However, with every right, a corresponding responsibility is also there which has to performed by the shareholder.

Why Sharks of Law ?

·       Single Platform- Sharks of Law offers you a single platform where affordable and easily accessible legal services related to the company matters are provided.

·       Expert advice- A client would need expert guidance and advice for issues troubling them. Sharks of law offers experienced advocates who offer best guidance for proper procedure required.  

·       Specialised advice- We offer you required guidance and advice for your legal issues.

·       Highly qualified advocates- Sharks of Law offers you a team of brightest and most driven lawyers who have years long experience in their field.

Easily accessible legal services- Sharks of Law believes that legal assistance should be easily accessible as one may need it at any time of the day, hence you may contact us through any medium you are comfortable with.