Know Rights of Shareholder before Investing in Stocks

As a shareholder of common stock, you have certain rights. It is important that you are aware of these as an investor. Broadly speaking, as a person who holds common shares, you have the rights to do the following:

  • Buy more shares of the company if they are on the market
  • Demand for fair and equal treatment
  • Have full access to their shareholder account
  • Claim a share in the profits of the company as long as you hold their shares
  • Vote in the company’s meetings such as the annual shareholders’ meeting
  • Help elect the company’s board of directors
  • Rely on the fact that the company is being lawfully overseen by a regulatory body
  • File a suit against the company in case you feel that your rights as a shareholder have been violated in some manner

Your rights according to SEBI

In India, SEBI (Securities and Exchange Board of India) is the business organization responsible for creating and enforcing regulations with regard to securities in the country. It was established in the year 1988. According to SEBI, shareholders in India have certain rights. If you are a shareholder, you can:

Participate in general meetings Shareholder

meetings business

As a shareholder of a certain company’s stocks, you have the right to participate in the general meetings of the company. It is also your right to vote in such meetings. Proxy voting is also allowed.

Receive share certificates

You are entitled to receive share certificates indicating that you have been allowed to purchase certain shares and that those shares have been allotted to you. In case of transfer of shares, that is also to be intimated to you, the shareholder.

Receive financial reports

financial reports business

You have the right to receive the performance reports of the company you have invested in. These reports are to be provided to you within a reasonable timeframe. These performance reports can include quarterly or annual reports and auditors’ reports. These reports will help you make a better decision regarding your investment in the company. Therefore it is of utmost importance that you receive them.

Receive dividends

If dividend distribution has been approved during the course of a general meeting, then, as a shareholder, you are entitled to receive the dividends being paid out. These dividends should reach you within a reasonable timeframe.

Inspect statutory registers

business registers

You are allowed access to inspect the statutory registers that the company has in its registered office.

Receive corporate benefits

Since you are part of the company’s list of shareholders, you are entitled to receive corporate benefits like rights and bonuses (if any) once they are approved by the company.

Call an annual general meeting

Provided you have the required number of shareholders to back you, as a shareholder, you can call for, or direct an annual general meeting. You can apply to the Company Law Board to do the same.

Inspect minutes of the meeting

Inspect meeting business

It is your right to receive and be able to review the minutes of the meeting in the case of annual meetings or general meetings. The company is required to provide these to you, the shareholder.

Buy more shares of the company

In case the company decides to issue more shares with the public, it is your right to be able to buy some more.

Receive an offer in the event of a takeover or buyback

Sometimes a company is taken over by another company. Sometimes companies choose to perform a buyback of their shares. In such cases, a shareholder is entitled to receive an offer. The takeover, buyback, and the offers should all be in line with regulations laid down by SEBI.

Apply for winding up the company

winding company business

As a shareholder, with the requisite number of other shareholders to back you up, you can apply for the company to be wound up. This can be done for different reasons. In case the company does wind up, then you are entitled to receive the residual proceeds.

File a case against the company

If you feel that your rights as a shareholder have been violated, then you are entitled to proceed with filing a lawsuit against the company. The lawsuit can be either a civil or a criminal lawsuit.

Rights of a group of shareholders

In addition to the rights of individual shareholders, a group of shareholders has their own rights. They have the following rights according to SEBI:

  • The group can call for an extraordinary general meeting
  • The group can request a poll in order to demand action on a resolution
  • The group can request the Company Law Board to investigate the company and can request redressal from the Company Law Board in the event that there has been obvious mismanagement

These are some of the rights of shareholders. These exist to protect the shareholders. In the event that a company violates these rights, the shareholder is allowed to seek redressal. The grievance will be heard by the Company Law Board initially and then taken forward. It is important to know these rights so that you are not taken for a ride by some company that does not have proper processes in place. For information on specific stocks and company details, visit BankBazaar.

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