- •1. Right to Participate in Management
- •2. Right to Profits
- •3. Right in Partnership Property
- •4. Right to Extra Compensation
- •1. Make Binding Contracts, for the Firm
- •2. Receive Money Owed to the Firm and Settle Claims against the Firm
- •3. Borrow Money in the Firm Name
- •1. Perpetual Life
- •2. Limited Liability
- •3. Transferability of Ownership Interests
- •4. Ability to Attract Large Sums of. Capital
- •5. Professional Management
- •1. Perpetual Succession
- •2. Corporate Name
- •3. Bylaws
- •4. Power to Conduct Its Business
- •1. The Right to a Stock Certificate
- •2. The Right to Transfer Shares
- •3. The Right to Attend Shareholder Meetings and, in Some Cases, to Vote
- •4. The Right to "Increase the Capital Stock
- •5. The Right to a Share of the Profits
- •6. The Right to Share in Distributions of the Capital
- •7. The Right to Inspect Corporate Books of Account
- •1. Agreement of the Shareholders
- •2. Forfeiture of the Charter
- •3. Consolidation or Merger
- •4. Bankruptcy
- •5. Court Order
2. The Right to Transfer Shares
A shareholder generally has the right to sell or to give away any shares owned. However, this right is sometimes limited in closely held corporations, where the owners may want to limit ownership to employees or to members of a given family. Accordingly, the corporation's charter may provide that an owner who wants to sell shares must first offer them to the corporation or to other stockholders.
3. The Right to Attend Shareholder Meetings and, in Some Cases, to Vote
A shareholder may attend shareholder meetings and vote shares owned in any class of stock which has the right to vote. Regular meetings are usually held annually at the place and time designated in the articles or bylaws.
Notice of the regular meetings usually is not required. Reasonable notice is required, for special meetings.
In a corporate election, a shareholder usually is entitled to the number of votes that equals the number of shares of voting stock held. Having a minority position (being a minority shareholder) means owning less than 50 percent of the voting shares. To safeguard the: interests of such shareholders, many states provide for cumulative voting in the election of directors. Under this plan, each shareholder has the right, to cast, as many votes as the number of shares of stock held multiplied, by the number of directors to- be elected. The shareholder may cast all available votes for one candidate or distribute them among two or more candidates.
A shareholder who does not wish to attend meetings and to vote personally ordinarily has, the right, to vote by proxy. Millions of persons who individually own comparatively few shares of stock in various corporations cast their votes in this manner. The management mails the necessary proxy forms to all shareholders and solicits their votes. The shareholders may then sign and return the forms. However, if they are satisfied' with the corporation's performance, the shareholders usually give their proxies to incumbent directors, giving them authority to cast the votes. Federal law requires that the proxy form give the shareholder an opportunity to specify by ballot approval or rejection of particular proposals. Proxy voting, especially when there is no right of cumulative voting, usually enables present directors and officers of large corporations to remain in control indefinitely ,and then to name their successors.
4. The Right to "Increase the Capital Stock
Shareholders alone have the right to increase the capital stock (total shares of stock) of the corporation. This is usually done by majority vote, on the recommendation of the board of directors. In some corporations, when the capital stock is increased, each shareholder may have a right to purchase additional shares to maintain the percentage of interest in the corporation owned before the increase. This is called the preemptive right. It enables shareholders to protect their:
a. proportionate interest possessed in past and future profits, and
b. proportionate voting power.
Practically, if there is no preemptive power little usually is lost. Most individual shareholders in larger corporations own too few shares to be concerned about their voting power. The sale of new shares to outsiders brings in new capital, which should increase the total profits, thus benefiting all shareholders. Sometimes large blocks of unissued shares are needed by the directors to purchase whole companies; the preemptive right could prevent such action.