Shareholder Rights and Disputes

Posted on: October 16, 2014
Arlington civil litigation attorney

Investors who purchase shares of corporate stock have certain rights. Although they typically have no say in the control or direction of the company, their investment is at risk if the company fails. Fairfax business lawyers see disputes arising when failure becomes a real possibility.

Rights

Among the main rights of a shareholder are:

• Ownership of a portion of the company. Based on the performance of the company, the value rises or increases with the price of the stock. If liquidation becomes necessary, the value becomes a portion of the company’s assets.
• The right to vote on major company issues. The election of directors, the approval or disapproval of a merger or a liquidation are examples, which the shareholder can do directly or by proxy.
• The right to trade shares. Liquidity is a primary advantage of owning stock.
• The right to receive dividends. A company’s directors and management make the decision whether to reinvest profits in the company or pay dividends. If dividends are declared, the shareholder has a right to their portion.
• The right to inspect company books and records, including public filings and the annual report.
• The right to sue the company for wrongful acts by the directors and officers of the company. When disputes arise, legal action is a possibility.

These rights are general in nature; to fully understand all the rights of a shareholder of a particular company, it is necessary to examine the company’s charter and by-laws.

Disputes

Issues that arise may have their genesis in the way a company was initially set-up, but it is more likely that problems of mismanagement or misconduct are the cause. Commonly observed disputes include:

• Minority shareholder oppression
• Disputes over dividends
• Disputes over executive compensation
• Breach of fiduciary duty
• Intellectual property issues
• Fraud and deceit
• Business succession disputes
• Shareholder buyouts

Contact Fairfax Business Attorney for Legal Advice

If you believe your rights as a shareholder have been violated, you need to explore your options. It may be possible to negotiate a resolution or the intervention of the courts may be necessary. Call the Fairfax business lawyers at the Law Offices of Paul S. Schleifman at 703-528-1021.