Are Shareholders the Real Owner of the Business?
Shareholders are the people that own one or more shares of stock in a corporation. They are also known as stockholders. The essential things that incorporated of being a shareholder are: the person has the right to receive dividends for each share as approved by the Board of Directors. The shareholder also has the right to vote for members of the board of directors, to take any legal action just in case there is mismanagement takes place. Furthermore, he/she has also the right to participate in the partition of the value of assets, if there is still left upon the termination and closure of the corporation. A shareholder’s name should be included in the registration of the name of the corporation. There is also an issuance of stock certificate to the shareholders. When a corporation is established, there are number of stockholders or shareholders are authorized to implement a set of company rules and policies over the fundamental company standard operating procedures, values, mission and vision as well as the main goals of the corporation. Each shareholder has given the right to take charge for every decision making for the growth and development of the organization. When a company is formed its shareholders make sure that a company must be owned and managed right, and there must be an expected return of investments within a specific period of time.
(http://legal-dictionary.thefreedictionary.com/shareholder)
Furthermore, when a company is established there must be an issuance of Memorandum and Articles of Incorporation which will be filed with the Registrar of Companies. However, any shareholders’ agreement and its contents will remain discreet from public filing. A good performance from the board of directors and the good corporate governance are the very important factors for any company to continually function effectively and able to meet favorable results. So, it must be a crucial decision among the shareholders to choose deliberately among themselves the most capable and well functioned members of the board of directors. By this way, the company would be assured that the entire organization will be ran diligently and effectively by the well experienced and responsible board of directors.
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But before going to the shareholder’s agreement, there are some very important thoughts that must be given extra attention. Like, who owns the biggest share? How many shares does every shareholder have? How do they contribute to the growth and development of the company? What kind of contribution they are going to give? Is it through cash, time, and intellectual aspect? These are some crucial factors in personal tax planning that must be consulted to tax experts.
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In creating a shareholders agreement, there are some very essential factors have to be taken serious consideration. Such as the kind of structure the company would have, the proper way to divide the equity among the shareholders, should the agreement be unanimous or just among the shareholders themselves. Who will be capable of functioning as members of the board of directors, who will be officers and managers, what would be constituted in a quorum for meetings? Just in case there are business disputes and problems how are they going to resolve them, the shareholders’ obligations and commitment to the company and many more legal matters that are needed to be studied closely before entering a corporate governance among the shareholders. (http://philtown.typepad.com/phil_towns_blog/2006/01/shareholders_ar.html)
According to Stephen Bainbridge, a corporate law professor at UCLA; the idea of being a shareholder must be given recognition that whether a shareholder owns only 1 percent of the share or the other shareholder owns 80 percent of the corporation. They must be recognized and acknowledged as both owners of the company. They must have equal rights to be given sense of dealing by the employees and other people who are involved in the company. Sharing stocks in a company gives enough reason to the shareholder to think that he is one of the owners of the company. Because he believes that owning a stock in any business entity gives the shareholder an expectation that he is already a part of the ownership of the company. So, therefore, shareholders are real business owners because of his/her right to hire members of board of directors to handle the company’s regular interactions with the CEO of the organization. A shareholder has also the right to change the by laws of the business, a shareholder could also cause a liquidation of the business. Meaning, the only difference between owning 1 % share from owning 80 % share of the corporation is the value or the amount of money they invest for the company. But, still the same; they both have the equal rights to decide for the company because they are both shareholders.
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References:
(http://legal-dictionary.thefreedictionary.com/shareholder)
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