What Rights Do I Have as a Shareholder Against the Directors and Officers of a Corporation?
Provided by HG.org
Shareholders in a corporation have rights just as any other member of the company does. It is important to understand what rights are afforded, how they may be used when needed against directors and officers and what is necessary to ensure these rights are protected.
When someone invests in a company through shares or stock, he or she then usually obtains an interest and becomes a shareholder. This is generally a portion of possession in the greater whole. These shareholders could be minor or major shareholders with a lesser or greater amount of control in votes and during meetings. This voting gives another measure of control in electing board of directors and changing the very bylaws of the business. This means if one of the board is not acting in the best interests of the corporation, a majority of the shareholders could be convinced he or she should be removed with someone else elected to take his or her place.
Usual voting rights are enacted during annual meetings that are required by most states for the corporation. These are recorded through minutes with all pertinent data saved. Special meetings could be requested when special issues arise that necessitate the event. However, because many shareholders live in various locations around the world, these generally need to be scheduled carefully so that members may attend. However, to protect the interests and rights of a shareholder, if he or she cannot make the meeting, a proxy may be used in his or her place. There may be other rights granted to these persons, but voting is one of the greatest tools available to a shareholder.
Shareholder’s Rights Explained
While the ability to vote is important, there are other rights that could prove just as essential. When becoming a shareholder, these persons have the right granted to investigate and peruse the books of the corporation. However, it is imperative that the reasons for looking through these documents is related to his or her financial interests as connected to the corporation. Then, the company must grant the request. Some businesses may require that only those with more than a certain number of shares are permitted this action. Others may demand that the shares have been owned for a number of months before an inspection is allowed.
Fiduciary duties obligate directors to ensure that the best interests and care to the corporation are carried out and enacted. The duty of the shareholder is to elect a new board of directors member if he or she has violated this fiduciary duty. The individual member of the board must show loyalty, care, legal and similar responsibilities towards the company, and this could include shareholders with a majority interest. This permits these members to work for the business with a salary and other benefits. If enough shareholders find any of these obligations lacking or the company is threatened by one of these persons, they are able to elect a new member of the board of directors.
Directors and Officers in a Corporation
Directors must make decisions constantly on behalf of the company. Even if these result in negative consequences, this does not mean that the fiduciary responsibility was compromised. The actions of a board of directors member may not be held liable solely based on a bad decision, if he or she was acting in the best interests of the business. The documents of a company usually explain the roles of officers such as the president, treasurer and others. These files are the articles of incorporation, corporate by-laws, and statutes which detail these matters and persons. This means that the president is the primary officer of the business and carries out most decisions other than those of the board of directors.
Because officers owe a fiduciary duty to the company, they may be affected by decisions of shareholders. If an action taken by an officer of the company directly affects shareholders negatively, these persons may have the right to correct this action when the next vote takes place. The activity of officers may be held liable when taken on behalf of the company. Any criminal acts perpetuated by these individuals could result in termination, criminal charges and civil charges when harming the corporation.
The Business Lawyer for Shareholders
When a shareholder is harmed by the board of directors or officers, it may be necessary to hire a lawyer to look into the matter. It is important to protect the rights of shareholders.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.