Shareholders and their Rights
Shareholders are the different investors who contribute to a corporate entity in order to advance it and reap the benefits of its operations. Despite having the right and opportunity to be involved in overseeing management activities, the board of directors is responsible for protecting the interests of the shareholders. The shareholders' legal perspectives should generally be distinguished from the corporation's legal perspectives because the corporation exists as a separate legal entity. A company and a shareholder are different from one another, allowing the corporation to operate as a registered person while shareholders benefit from restricted liability. The distinctive aspects are that both the shareholders and the entity have distinct liabilities along with different duties and privileges.
Types of Shareholders
The Company's Act recognizes different shareholder categories including the minority and the majority shareholders. The shareholders' rights are distinguished according to the laws that govern the article. There are those rights that are exercised in the general meeting and those exercised outside the meeting depending on the nature and the involvement of the shareholders as per the company policies and corporate legal laws. The minority shareholders are those that own less than 50% of the total corporation's shares with little influence on the daily management operations giving them the legal protection from abuse by the majority shareholders in specific outlined cases in the Company's Act (Carr Law 2017). Minority shareholders have the right to dissent to the amendments of the articles of the enterprise where there are changes to be made or provisions relating to the issuance of shares.
Rights of Minority Shareholders
The other substantial rights of the minority shareholders are entitled to attend meetings and also to vote during the session in the general meetings. A corporation is supposed to hold annual general meetings that address issues affecting the company, including the presentation of financial statements. The minority shareholders are also expected to participate in resolutions concerning the payment of dividends (Lewis & Bockius, 2017). A further right is the approval of the director's fees, which is regarded as different from that of permanent employees. A minority shareholder has the right to inspect the minutes of the meeting that informs him of the resolutions that are made regarding the memorandum of association.
Legal Protection of Minority Shareholders
The legal provisions affecting shareholders hold that the minority shareholders should be updated with the proceedings of the corporation and involved in decision-making. According to Lewis and Bockius (2017), a minority shareholder may seek legal intervention when the directors operate the affairs of the corporation in a manner that violates their interests. The other legal issue outlined in the Company's Act resolutions section revolves around discriminative interests between the majority and minority shareholders. The court has the discretion to restrain the breach of any provisions of the memorandum and articles of association, as indicated by Hinkston (2010), to ensure that their operations fulfill the Company's Act and the company's memorandum of association.
Majority Shareholders and their Rights
Majority shareholders are the shareholders who own more than half the total shares in a company. These shareholders have the entire control of the company's operations and, more importantly, in the selection of directors and other executives involved in the company's activities (Law teacher, 2013). The majority shareholders have several rights outlined in the Company's Act. The majority shareholders have the right to dividends that are proportionate to their corporate shareholdings. Whenever there is an additional amount of stock issued, the shareholders are entitled to the same share according to their share contribution (Jiles, 2002). Majority shareholders also have the rights to access the records concerning the minutes of the general meetings as well as the information that empowers them through accurate details on the intended actions of the corporation.
Duties of Majority Shareholders
These shareholders have to exercise their roles as stipulated in the Company's Act and the memorandum of association. These roles are also bidding and enforceable by law. In the case of a closely held corporation such as family businesses, majority shareholders are regarded as directors of the company, and they owe certain duties to the minority shareholders. There are legal issues that concern the majority shareholders who also serve as the company directors, including their inability to discriminate against other shareholders. The existence of interest between the minority and the majority shareholders brings in the general fiduciary duty of fairness and which will attract the concern of the court if these obligations are violated (Jiles, 2002).
Balance of Interests
In the modern environment, many companies have enhanced their well-being by ensuring the managerial power is significantly considered rather than the involvement of shareholders in the corporate business. The conflicts between the majority and minority shareholders have been seen as a factor that contributes more to the failures of a company (Cross & Miller, 2016). Corporations in modern days have come up with strategic measures which involve corporate governance system that addresses the interests of both the majority and the minority interests. The law employs legal instruments that ensure that the majority shareholders do not override their interests while hindering those of the minority shareholders.
The Debate and Public Opinion
The legal opinion about the differences in interests between the majority and minority shareholders is that shareholders, in general, should give the corporate management a chance to deliver their interests in their professional way. The shareholders have been seen to have more powers, but yet the results of the company have been frustrated, which suggests that the shareholders are the real problems of many business failures. On the other hand, the public opinion has it that the corporation has proved to be failing the shareholders since they don't entirely own the corporation (Fox & Lorsch, 2012). Both the minority and majority shareholders should be concerned with decision-making because they feel that their investments would be at stake if they are not involved in the management of these corporate businesses.
References
Carr Law. (2017). Business incorporation organization operation rights minority shareholders. Retrieved from http://carrlaw.com/business-incorporation-organization-and-operation/rights-of-minority-shareholders/
Cross, B. & Miller, L. (2015). The legal environment of business (10th ed). Boston, MA: Cengage Learning.
Fox, J. & Lorsch, W. (2012). What good are shareholders? Harvard Business Review, 2012. Retrieved from https://hbr.org/2012/07/what-good-are-shareholders
Hinkston, R. (2010). Minority shareholder remedies under Wisconsin law. The Official Publication of the State Bar of Wisconsin, 83(5).
Jiles, G. (2002). Business: Shareholder rights, duties, and responsibilities. Retrieved from http://thecabin.net/stories/101302/mon_1013020008.shtml#.Wcf_zbKGOt-
LawTeacher, (2012). Position of majority and minority shareholders. Retrieved from https://www.lawteacher.net/free-law-essays/business-law/position-of-majority-and-minority-shareholders.php
Lewis, M. & Bockius LLP (2013). What are the rights of a minority shareholder in an unlisted private company? Is there a regulatory body that looks after the rights of the minority shareholders in such a company? Retrieved from https://www.lexology.com/library/detail.aspx?g=95eebdbc-6fb3-4569-a693-80222841884a
