Question

What are the basic rights of stockholders?

Short answer

The voting right, dividend right, liquidity right, and pre-emptive right are the four basic rights of stockholders.

Step-by-step solution

Introduction to the topic

A stockholder, also called a shareholder, is an individual, company, or institution that owns at least one share of a corporation's stock, known as equity.

Shareholders have several rights such as the appointment of the company's director, voting rights, right to access financial records, right to sue interested parties for wrongful acts, right to attend the Annual General Meeting, and right to transfer ownership.

Step 2: Four basic rights of stockholders

Unless a right is withheld by contract, a stockholder has four basic rights:

1. Voting rights:

Each share held by a stockholder in the corporation carries one vote, i.e., one share, one vote.

2. Dividend rights:

Stockholders receive a proportionate dividend declared and paid by the corporate. Two types of dividends are offered, cash dividends and stock dividends.

3. Liquidation rights:

Stockholders receive their proportionate share as per the number of shares held by that shareholder of any assets remaining after liquidation.

4. Pre-emptive rights:

Stockholders reserve an option to maintain their proportional ownership. This right protects a shareholder's ownership interest from being diminished by the issue of more shares.