Shareholder Rights in a Corporation

by Marianne Sorensen

The rights of shareholders are largely set out in the corporation’s bylaws, which is the first place to look when determining what your rights are a shareholder are. Typically, shareholders have the right to:

  • Vote on issues that affect the corporation
  • Receive dividends as declared by the board of directors
  • Inspect the corporation’s books and records
  • Bring suit against the corporation for wrongful acts by the directors and officers of the corporation
  • Share in the proceeds recovered when the corporation liquidates its assets

Shareholders hold general meetings in accordance with the by-laws of the corporation. The primary purpose of these meetings is for shareholders to elect the directors of the corporation. Sometimes shareholders are authorized to call special meetings on matters that require immediate attention, though only those issues set forth in the notice of the special meeting may be voted on.

Shareholders may conduct business by unanimous consent, without holding a shareholder meeting. This is common in closely held corporations, where shareholder actions are typically unanimous.

Shareholders typically vote on matters such as:

  • changes in the articles of incorporation
  • merger with another corporation
  • sale of substantially all of the corporation’s assets that is not in the ordinary course of the corporation’s business
  • voluntary dissolution of the corporation
  • corporate transactions where some directors have a conflict of interest
  • amendments to bylaws or articles of incorporation

Shareholders may also make nonbinding recommendations about the governance and management of the corporation to the board of directors.

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