Written byThe Inspired Investor Team|Published onOctober 27, 2021
You've purchasedstockin a publicly traded corporation—congratulations, you're now part-owner of a company! But while you might not have any actual responsibility in the day-to-day operations of the business, you may still play a role as ashareholder. In fact, whether you're a minority shareholder with a single common share or hold thousands ofpreferred shares, you have many rights that you should be aware of.
The right to information about the company
As a shareholder, you have the right to examine and copy corporate records, statements and directors' reports. You also have the right to receive the corporation's financial statements at least 21 days before the annual shareholders' meeting.
The right to vote
Common shareholders can vote to elect (or dismiss) the company's board of directors, a group of executives who supervise the activities of an organization. Shareholders also have voting rights on other major issues. If the company is considering a big change, such as a merger or restructuring, common shareholders are generally given the opportunity to weigh in.
Generally speaking, a shareholder is entitled to one vote for each share they hold in a company.Preferred shareholders, on the other hand, usually don't have voting rights.
The right to receive dividends
If a company paysdividends(a cash distribution paid out from a company's earnings), shareholders are eligible to receive them. Dividends paid to common shareholders can be increased, decreased or cut at any time at the discretion of management, whereas preferred shares pay dividends that are fixed and regular, and generally higher than those paid to common shareholders.
The right to attend the company's annual shareholders meeting
At an annual general meeting (AGM), the executives of the company present an annual report that explains the company's performance, strategy and future plans. If you have voting rights—which, again, depends on the types of shares you own—you'll vote on things like the board of directors, the company's auditor, executive compensation and dividend payments. If you can't attend the meeting, you have the right to vote by proxy.
During the COVID-19 pandemic, the Government of Canada created alternatives to hosting AGMs in person (which could run afoul of health and safety guidelines). Under current rules, companies are allowed to hold virtual AGMs, or they can create written resolutions that are to be signed by all shareholders. Delaying an AGM is a third option only afforded to non-profit organizations, which cannot issue stock.
The right to compensation if the company's assets are liquidated due to bankruptcy
If things go south with the company you've invested in, you have the right to be compensated, proportional to your ownership stake. Common shareholders take heed: you are the lowest priority in any debt-repayment scenario, whereas holders of preferred shares rank higher.
The right to sell shares
Shareholders can generally sell stock whenever they would like to, as opposed to other types of investments that might not be as easy to liquidate.
Can shareholders sue a company?
A legal mechanism called the "oppression remedy" permits a shareholder to bring court action against a company if they believe it has acted in a way that is oppressive, prejudicial or unfairly disregards their interests. Such circ*mstances could range from shareholders being denied reasonable access to corporate records, to executives using company resources for their own ends at theexpense of other shareholders.
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