Since the majority of states have adopted the Model Business Corporation Act, shareholder rights are generally consistent from one state to the next. State statutes should be consulted to determine whether an individual state has granted any specific rights to shareholders of businesses incorporated in that state.
Nevertheless, the rights of shareholders depend largely on provisions in a corporation's charter and by-laws. These are the first documents which a shareholder should consult when determining his or her rights in a corporation. Shareholders also generally enjoy the following types of rights:
Voting rights on issues that affect the corporation as a whole:
They have the right to assist to the annual meeting or to the fixed ones for the purpose of voting and deciding the curse of the corporation. Some of the decisions that can be taken in these meetings:
- Approval or disapproval of changes in the articles of incorporation
- Approval or disapproval of a merger with another corporation
- Approval or disapproval of the voluntary Dissolution of the corporation
- Approval or disapproval of amendments toBylaws or articles of incorporation
- To make recommendations about the governance and management of the corporation.
Discussion: Peter, shareholder of company C suits to declare a corporate merger void for the circulation of false proxy solicitation material in connection with a special stockholders meeting at which the proposed merger was to be voted. Peter alleged to have preemptive rights.
Rights related to the assets of the corporation
Rights related to the transfer of stock
Securitys: “Laws designed to avoid fraud”.
Conversion Rights: For example, an owner of preferred nonvoting stock may want to own common stock that has voting rights.(limited by corporation Bylaw)
Redemption rights: This right permits the shareholders to redeem their stock to the corporation for a value specified in the articles of incorporation or set by the board. (limited by corporation By-law)
Preemptive rights: this right allows shareholders to purchase new shares of stock before they are made available to the public.
Example: Julia is a shareholder in Corporation A and owns 10 percent of the corporation. The corporation issues new stock, Julia would own less than 10 percent if she did not purchase new stock. If she exercises preemptive rights, she may purchase as many new shares as necessary to retain that 10 percent interest.
Rights to receive dividends as declared by the board of directors of the 
corporation
Common Stock
Owners of common stock have voting rights in a corporation as well as rights to receive distributions of money from the corporation (dividends). They are the last ones to receive the dividends.
Holders of preferred stock are entitled to fixed dividends and fixed rights to receive a percentage of a corporation's assets are liquidated.
Example: Tue has a preferred stock in the Corporation B, "$30 preferred," this means that he has the right to receive $30 in dividends per share before dividends are paid to common stock owners.
Preferred stock owners generally do not have the same rights to vote as common stock owners.
Case Discussion:
Company M is well known in Massachusetts for being a profitable corporation. Even though, in last 13 months has expedience unexpected difficulties and economic troubles. Nevertheless, the directors have continued to give distributions to shareholders based on their rights to receive dividends.
“Directors who declare and shareholders who receive, distributions from a profitable Massachusetta business corporation in the ordinary course of business stand little risk that they will incur liability for such distributions. Nonetheless, when a profitable corporation experiences unexpected difficulties, or when a corporation experiences economic troubles that it had feared but hoped would not occur section61 and 45 of the Massachusetts Bussiness Corporation Law can impose liability on directors and shareholders for current and past distributions”
Section 61 may impose liability on director who authorize an insolvent corporation’s distribution or a distribution that makes a corporation insolvent. Section 45 imposes liability on shareholders who receive a distribution from an insolvent corporation or a distribution that makes a solvent corporation insolvent.” (Article: Director and Shareholder Liability for Massachusetts Corporations Distributions to Shareholders, James E. Tucker)
Rights to inspect the records and books of the corporation
Qualified Rights: Books papers, records, etc.. upon five days written notice starting a proper purpose.
Unqualified Rights: Any Shareholder may inspect the following records regardless of purpose.
Case Discussion:
Eva needs the information regarding the corporations articles and by laws. She send her boy friend to conduct the inspection.
Rights to bring suit against the corporation for wrongful acts by the directors and officers of the corporation
Shareholder Direct Litigation : Shareholders can protect their ownership rights in their shares by bringing a direct action against a corporation.
Such cases may involve:
· Contract rights related to the shares;
· Rights granted to the shareholder in a statute;
· Rights related to the recovery of dividends;
· And rights to examine the books and records of a corporation.
Shareholder Derivative Litigation
Shareholders may bring suit as representatives of the corporation in a derivative action. Such an action is designed to prevent wrongdoing by directors of the corporation.
Anders brings a direct action against a corporation by alleging that a director has breached a Fiduciary duty owed to the corporation. Is this the appropriate action to bring?
Rights to share in the proceeds recovered when the corporation liquidates its assets
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