Which of the following is correct pertaining to the rights of stockholders in a corporation
Shareholders are the owners of the corporation. They have ownership rights in the shares of corporate stock. The role of the shareholder in the corporation is limited, however, as they have neither the right nor the obligation to manage the day-to-day business of the enterprise. Shareholder rights vary pursuant to the type of stock owned and the applicable state law. State law is heavily influenced by authoritative sources, such as the Model Business Corporations Act (Model Act). Below is an explanation of common rights afforded corporate shareholders under state law. Show
Next Article: Characteristics of Corporate Ownership Interests (Stock) Back to: CORPORATE GOVERNANCE Shareholders have the right to access and examine corporate records and information concerning the governance and financial performance of the entity. In public companies, much of the operational and financial information about a corporation must be reported to the public by filing with the Securities Exchange Commission. Companies must also disclose this information directly to shareholders on largely standardized reporting documents. Private companies, on the other hand, do not publicly report information. Further, there is no specific requirement to make periodic disclosures to shareholders. As such, shareholders in non-public entities must generally make requests for information. State law provides for the substantive and procedural rights of shareholders to access and review corporate records.
All corporations must have at least one class of stock representing an ownership interest in the company. In most corporations, the basic ownership share is known as common stock. These shares entail voting rights for the shareholder.
What is the Difference Between Straight Voting and Cumulative Voting?Boards generally employ either straight voting or cumulative voting to elect directors.
What are the Rights to Vote for Fundamental Changes in Corporation?Shareholders must approve any fundamental changes to the corporation. Fundamental changes include:
All state corporate statutes (as well as large public exchanges) require corporations to hold annual shareholder meetings. During these meetings, the corporation will conduct any required or desired corporate governance actions, such as electing directors. The requirement to hold meetings may be relieved for small corporations that handle these matters through unanimous written consent by the shareholders. Directors and large blocks of shareholders may call special meetings for any number of purposes. Notably, special meetings are appropriate when shareholders must vote upon a fundamental change to the corporation. Various state laws protect shareholder meeting rights.
Certain shareholders have the right to propose specific corporate actions to be taken at corporate meetings. This is normally done through adding these agenda items to corporate proxy statements. Under state law, a shareholder holding 1% of the outstanding shares or $2,000 worth of shares may request a proposal be placed in the corporate proxy material for shareholder vote. The primary limitation is that the shareholder proposal cannot usurp managements authority by making proposals related to ordinary business operations. If the shareholder proposal relates to the authority or rights reserved for shareholders, the result of the vote on the shareholder proposal is binding on the corporation. Proposals that are outside the ordinary authority of shareholders (i.e., it is a decision reserved to directors or officers), the proposal is not binding upon the board or officers.
In most states (and under the Model Act), corporate law allows for dissenter rights. Dissenter rights are a special group of rights designed to provide protections to shareholders in corporations that are not actively traded in the market. In a widely-held, public company, shareholders who do not agree with fundamental issues of corporate management or governance can sell their ownership interest. This is generally not an option for shareholders in closely-held and private corporations. Dissenter rights allow these shareholders to force the corporation to buy back their shares at fair value.
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Discussion QuestionHow do you feel about the fundamental rights of shareholders? Should the rights be more or less extensive? Why or why not? Can you think of an example of any other rights or authority that could serve to further protect shareholder rights? Practice QuestionMark suspects that the directors of the corporation have engaged in actions that are detrimental to the corporation and shareholder interests. What rights does Mark have to investigate the directors actions? If Mark is correct, what shareholder rights provide Mark with the ability to prevent this type of activity in the future?
Academic ResearchWhat are the rights of stockholders in a corporation?Common shareholders are granted six rights: voting power, ownership, the right to transfer ownership, dividends, the right to inspect corporate documents, and the right to sue for wrongful acts.
Which one of the following is not an ownership right of a stockholder in a corporation?The answer is b.
The stockholders, themselves, do not have the right to declare dividends to be paid to the...
Which of the following is the right of ordinary of shareholders?The Rights of Ordinary Shareholders
Ordinary shareholders have the right to a corporation's residual profits. In other words, they are entitled to receive dividends if any are available after the company pays dividends on preferred shares. This is effectively meaningless.
Which are rights of common stockholders quizlet?Common stockholders have the right to vote at stockholders' meetings, sell or otherwise dispose of their stock, purchase their proportional share of any common stock later issued by corporation, receive the same dividend if any on each common share of the corporation, share in any assets remaining after creditors and ...
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