Friday, April 23, 2010

Shareholder benefits & dividens

I'm an employee of a company and recently as a shareholder also of the private limited company. I'm holding the 10% share of the company but also the smallest share among all the shareholders. May I know what kind of benefits I should have as a shareholder of the company but not a director.

2 comments:

  1. I believe there is a distinct difference between a shareholder and a director of a company.

    As a shareholder you have an equity in the company according to the number of shares you hold in the company. Technically, you are an owner of the company limited by your number of shares you hold. You may be have the right to be informed of the company's performance by the directors from time to time, appointment of the directors, company secretaries, auditors etc. But a shareholder cannot unilaterally decide in dividend distribution, though the shareholder can seek sufficient vote from other shareholders to direct the directors to pay dividend

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  2. A shareholder in a company is the owner (in proportion to his shares) of the company. Say If you own 10% of the shares in that company you have the effect of 10% of the votes (if thats how voting power is distributed in its constitution).

    Depending on how many other shareholders there are and how many shares each of them controls, you could be a minority, a significant shareholder or even a majority (Where others hold individually less than 10% each. e'g' there are 20 shareholders and 19 of them hold 4.7 shares each. Clearly you become a majority and your vote will hold more clout than the others individually unless they gang up on you).

    As for distribution of the companys earnings in dividends, this depends on the company's policy and its constitution. A company is not compelled to distribute dividends and is not compelled to distribute it according to shareholding. It may distribute its shares according to how the board wants it to. In this respect the board can be controlled by its hareholders. Therefore if you are a majority you will control a large voting block on the board and could vote down any resolution you do not like and up hold anything the others may not like.

    Always remember that in the end the directors are accountable. if they act in contravention of the company's law, then regardless of hom many shares they have behind them they will be called to account and can be held personally and professionally liable.

    A shareholder can sue the directors by standing in the shoes of the company if required.

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