Being a shareholder offers several fantastic privileges, but many shareholders aren’t fully aware of all of their rights. In this blog, we’ve put together a list of shareholder rights and the benefits of shareholder protection insurance. So, what rights do shareholders have?
What rights do shareholders have?
To attend company meetings and vote
All company shareholders have the legal right to be notified of general meetings and attend them if desired. This includes Extraordinary General Meetings and Annual General Meetings but does not include meetings between company directors alone.
Shareholders will usually also be given the right to vote at general meetings. Usually, shares will possess one vote, but this is not always the case.
However, there may also be non-voting shares, which do not possess any voting rights, as well as shares that offer the holder the right to cast multiple votes per share. Some shares may only be given the right to vote under specific circumstances. If a shareholder is not able to attend, they can appoint a proxy to cast a vote on their behalf.
To receive a share of the company’s profits
Businesses have the freedom to distribute profits to shareholders via dividends. Dividends can only be paid via profits, and if the business is profitable, the directors are not required to declare their dividends. Shareholders do not have the right to vote to pay a dividend over the director’s recommendations.
Usually, the dividend in question will be paid per share as a fixed amount, but this can be changed if required. Some share classes are not given the right to dividends, and some may only qualify for dividend payments under specific conditions.
To receive final company distributions
If a business is wound up, the first party that needs to be paid any available funds is the creditors. However, if there are extra funds, this can be shared between shareholders in proportion to how many shares they hold. However, in these circumstances, different rights are given to different share classes regarding distribution.
To transfer ownership
Shareholders have the right to trade their stock on an exchange. This might seem like a mundane process, but the liquidity stock exchanges offer is essential.
Liquidity is the degree to which security or an asset can be quickly purchased or sold within the market without impacting the price of the asset. This is one of the primary factors that distinguish stocks from investments, such as real estate.
If an investor is a property owner, it can take months to turn that real estate investment into cash. However, the liquidity of stocks makes it easy for investors to transfer their money to other locations in an instant.
Shareholder protection insurance: What is it?
Shareholder protection insurance is a form of business protection insurance that provides shareholders with the financial capability to purchase shares back from one another in the event one of them passes away, falls ill or is no longer able to work.
The benefits of shareholder protection insurance
Shareholder protection insurance is designed to give business owners a helping hand during difficult times. The loss of a shareholder can be an uncertain time for any company.
Having shareholder protection insurance offers companies financial stability, and it means that businesses don’t need to cut spending or dig into their savings to purchase the shares lost.
Shareholder protection insurance can also give business owners the opportunity to maintain control over their firm. Without a shareholder protection insurance policy in place, unwelcome beneficiaries or business rivals could inherit the shareholder’s stake in the business.
Having a shareholder protection insurance policy in place allows shares to change hands smoothly without disrupting business operations. It can also give beneficiaries a clear idea of how much they will receive when they sell shares back to shareholders.
Contact our experts
Now you know the answer to ‘what rights do shareholders have?’. If you’d like to learn more about the benefits of shareholder protection insurance from a licensed provider, give our experts at WIS Business Protection a call on 0203 011 1968 or fill in our contact form here.