What Rights Do Shareholders Have?

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Under most state statutes, the rights of shareholders generally depend on provisions in the corporation's Articles of Incorporation, Code of Regulations, By-laws, Close Corporation Agreement or other Shareholder Agreement. Accordingly, these documents should be checked first when a shareholder is trying to determine his or her rights. All to often, Shareholders don't bother to find out what rights they have or don't have until a Shareholder dispute erupts.  And then it can be too late to do anything about it.

Shareholders of a corporation often have the following rights:

(1) Voting rights to elect directors, adopt the corporation’s Code of Regulations or amend the Corporation’s Articles of Incorporation;

(2) Voting rights on significant or extraordinary events that affect the corporation such as sale of all assets, merger, consolidation, liquidation, or dissolution of the corporation;

(3) Rights related to the sale, exchange or transfer of stock such as preemptive rights, put rights and call rights;

(4) Rights to receive dividends declared by the board of directors;

(5) Rights to inspect the books and records of the corporation;

(6) Rights to sue the corporation for wrongful acts by the directors and officers; and

(7) Rights to share in the proceeds when the corporation liquidates its assets.

If you have any questions about shareholder rights, or would like assistance preparing Articles of Incorporation, or other corporate governance documents, give me a call.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING. Minority interests in a closely-held company are worth less that controlling interests in the same company because minority interests lack the ability to control company decisions. Interests in a closely-held company are also worth less than comparable interests in a publicly-traded company because there is no stock exchange or other ready market for sale of closely-held stock. It is important to consider and agree on how interests in a company are to be valued. Call if you have any questions about how to value interests in your company. Jsenney@pselaw.com or 937-223-1130.