Business Monkey News brings together the latest news from the network related to the world of new technologies, companies, economics, and marketing, Helping you as an entrepreneur.

What Are a Company’s Responsibilities When They Have Shareholders?

by Byrne Anderson
0 comment

Shareholders are fundamentally the rightful owners of a company, and they get tasked with the responsibility of raising capital for the company. In return, shareholders will enjoy dividends for the entire time the company will be in existence. There are three ways in which an individual can become a company shareholder. These ways are:

  • Through a subscription to the company memorandum of understanding when the company gets incorporated
  • Investing in the company in return for new shares within the company
  • Obtaining shares from an existing member either through purchase, as a gift, or by will.

The subscribers to a company are the ones who take up the first step towards incorporation of a company, and they are the first persons who become the initial shareholders of the company once incorporation gets done. In an ideal situation, shareholders are allowed to transfer their shares at will. Still, through their article of association, a private company restricts transferring one share. Shareholders occupy a special status in the company, and just like other parties within the company, they also have duties and responsibilities. Below are some of the duties and responsibilities a company shareholder performs.

Duties and responsibilities of a company shareholder

Unlike other parties in a company, a company shareholder does not get involved in running the company’s day-to-day affairs. Such duties and tasks get performed by the company board of directors.

Serious decisions involving company goals and its overall performance usually demand the approval of the shareholders. Therefore, in most instances, a company shareholder will get involved in making the following company decisions.

  • Implementing or introducing new changes in the company constitution
  • Approval for declaration of company dividends
  • Company’s financial statements approval
  • When the business wants to wind up its operations either voluntarily or otherwise

The majority of shareholder’s decisions get deliberated and approved during the annual general meeting. Annual public meetings are crucial to a company as they are responsible for company performance appraisal for best dividend stocks and passing important company resolutions. In situations where important decisions need to get made, an extraordinary annual general meeting can get organized.

In most instances, a company shareholder can’t change or even amend decisions arrived by the company directors. It’s not even possible for them to interfere in the daily management of the company affairs. Still, shareholders are allowed to convene an extraordinary general meeting and raise a motion for removal from the office of any director or the entire board of directors. Consequently, shareholders have the powers to amend the company articles and have directors of the company restricted on the capabilities they yield in the organization.

A company is obligated to maintain and keep its investors informed on the projects and the success the company yields. Therefore, several areas or ways a company has shareholders can maintain a well-informed investor database. Some of these ways include the following.

  1. Communication

Communication is not only crucial in any relationship, but it’s critical in all spheres of life. There is no essential difference when it comes to relationships with the company investors. Continuous and frequent communication with your investors will give them no reason to get involved in running the company’s daily affairs.

It would be best if you regularly had an honest and candid interaction with your investors. Ensure that you cultivate transparency even when you are delivering not-so-good news. Investors appreciate honesty, even if it means setbacks than sugarcoated lies. Maintain clear communication channels that keep your investors upfront will always maintain an informed investor.

  1. Listening actively to your investors

As a significant shareholder with vested interests in the company, an investor will always have ideas and even suggestions about its well-being and management. Even if you will not make use of their recommendations, it’s always advisable to massage their ego and make them feel they influence the company. An investor wants the business to succeed in totality, and most of the time, you will find them interjecting on your ideas with their views of how things should get done.

It’s pretty critical to be an active listener, especially to investors. In most instances, their suggestions will fix the problems and challenges you were facing as a company. In all your business undertaking, you must understand that all investors are after a return on their investment in the company at the end of it.

You may also like