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What are the powers and limits of shareholders?

On Behalf of | Sep 8, 2021 | Blog |

Residents of Minneapolis and nearby areas of Minnesota may want to learn more about how much say a shareholder has in a corporation. Since shareholders own a corporation, people often ask what decisions they may make. Shareholders don’t have control over the day-to-day operations of the company, but they have rights granted by their state. For one, shareholders can vote at annual meetings. A call for a special meeting might also happen.

They can propose a course of action

A shareholder may propose a course of action. This indicates that they have an interest in the corporation. It is non-binding, and they do not have to implement it. However, within the last 10 years, boards have become more responsive to proposals by shareholders.

Can initiate a resolution

If a shareholder thinks that someone in management is not doing their job, they may try to make a formal resolution to the board of directors to replace or remove one the directors. A lawsuit can allege that one of the directors has harmed the company through a breach of duties. This may push the company in a new direction.

No practical say in the company

The most power held by shareholders is control over the board of directors. On the other hand, a company may nominate its board of directors and give shareholders the power of a “yes” or “no.”

Some have demanded higher levels of transparency

Business law often calls for a company to be more transparent. This is especially true when it comes to its shareholders, who own part of the company. The shareholders choose to invest in the company, whether with a few or many shares, and want it to succeed.

Regarding powers and limits, shareholders have passive control over a company. It is the directors and officers who wield the most control.