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Sunday, May 11, 2014

Rights and Liabilities of a Shareholder


The following are the rights of a Shareholder :

(a) Statutory Rights: this are the rights which are conferred on the Shareholders by the Companies Act, 1956. This rights cannot be taken away or modified by the memorandum or article of association. Some of the statutory rights are as under:
1.       A Shareholder has a right of priority to have shares offered incase of increase of capital.
2.       Right of receive notices of meeting, attend and vote at meeting.
3.       Right to transfer share
4.       Right to receive share certificate
5.       Right to receive annual accounts of the company.
6.       Right to inspect the register of members, debenture holders and copies of annual returns.
7.       Right to apply to the central government for calling and annual general meeting if the board of directors fails to call such meeting.
8.       Right to apply to the court for calling an extra ordinary general meeting.

9.       Right to participate in appointments of directors and auditors in the annual general meeting.
10.   Right to petition to the central government for ordering an investigation into the affairs of the company.
11.   Right to petition to the High Court for relief in case of Operation and mismanagement
12.   Right to petition to the High Court for winding up of company.

(b) Documentary Rights: this are the rights given to the Shareholders by the memorandum or articles of associations.

(c) Proprietary Rights: Proprietary rights include the following rights
1.       Right to be registered as a share holder
2.       Right to be registered as a member in the register of member, subject only to valid and  authorize transfer of shares.
3.       Privilege of immunity from personal liability of companies debt.
4.       Right to participate in dividend distribution if ordered in the discretion of the directors
5.       Right to participate in the distribution of assets in case of liquidation of the company

(d) Remedial Rights: Remedial rights includes the following rights.
1.       Right to information and inspection of companies record.
2.       right to bring representative suits on companies cause of action to prevent or remedy mismanagement or unauthorized act and to compel the company to enforce its right, and
3.       common law, equitable and statutory remedies for infringement of individual rights.

Liabilities of Shareholders
Liabilities of the Shareholder depend upon the kind of company.
1.       In case of a limited company, the liability of each Shareholder is linked to the face value of the share he has agreed upon.
2.       In case of a company limited by guarantee, the liability of each Shareholder is to the extent of the guarantee agreed upon.

3.       In case of a company with unlimited liability the liability of each Shareholder is unlimited.