Corporate shareholders have rights which are not shared by partnership arrangements. If these rights are violated, some legal avenues are open for remedy.
Benefits of Shareholders
Shareholders are basically part owners of a corporation. They have numerous powers, such as the ability to vote on corporate issues. They also benefit when the corporation thrives. As opposed to a partner in a business, they usually are not involved in daily management of corporate affairs. An added benefit is that, despite their powers, they are not liable for debts that a corporation incurs. In other words, if the business fails, their personal assets cannot be taken to pay debts.
Shareholders have numerous other rights as well, including the receiving of dividends, the right to inspect company records, and the legal ability to bring suit against the corporation if their rights are violated or officers act illegally.
Liability of Shareholders
Shareholders are not immune if the corporation does not thrive, however. They can lose their investment. If the company fails, the shares they possess are lost. This gives shareholders an incentive for maintaining a strong and healthy organization. Other rights and responsibilities of shareholders depend on the corporation’s charter and by-laws. Matters that often lead to disputes may have their origin in the way the corporation was originally created, but more generally issues of misconduct or mismanagement are the root cause.
Common Areas of Dispute
An attorney may be able to help a shareholder if a dispute exists Among the more common areas of shareholder disputes are:
- Practices damaging the corporation’s success
- Litigation designed to oppress shareholder rights
- Financial disputes
- Fraud or deception
- Breach of fiduciary duty
- Intellectual property issues
- Employment disputes