MB Talk!

Shares and obligations: you are fully entitled!

The word “Shares” is not a new word to entrepreneurs, especially those who own registered or incorporated businesses. However, with shareholding comes some form of responsibility and that is what the other word “obligations” seeks to address. In this blog, I will be sharing some rights and obligations that come with having shares in a company.

It is very essential that we understand what being a shareholder means. Those who have shares in a privately held business, even with a minority position, enjoy several rights and privileges in exchange for their investment in the business, but they are also responsible for meeting certain obligations.

To begin with, what are your rights when you have shares in a company?

  1. You have the right to inspect the company’s list of shareholders, as well as the company’s record books.
  2. You have a right to attend shareholders meetings to lend your voice about major decisions to be made by the company.
  3. You have the right to join in the transaction when other shareholders are selling their stake in the company. You can sell your shares at the same time as well.
  4. You have the right to receive your share of the profits, which is in proportion to your stake in the company.

Having established some of your rights as a shareholder, what are your obligations?

  1. There should be consensus and consideration by factoring the views of other shareholders before coming to a conclusive decision.
  2. Pay very detailed attention to the profit/loss of the business.
  3. Be committed to devote your time to the advancement of the business. This could be very tasking sometimes, as it might involve having meetings during non-working hours, but for a shareholder, the progressive interest of the company should be at the centre of your heart.

The above rights and obligations are generic and can apply to most companies. However, I would recommend that the documentation of the shareholders rights and obligations for each company should be developed by a lawyer who is familiar with the laws that govern the operation of such companies.

Do you want to know more? Feel free to to book a session with us for suitable legal advice.

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