What are the rights of the stockholder? Share is a security representing the share capital. In other words, it is a security, stating the right of ownership of property. The share is a certificate of property. The owner of shares is a shareholder.
What rights does a shareholder have?Share is a document indicating participation in the assets of the company and gives its owner the following rights:
– The right to participate in the distribution of profits of the company,
– The right to participate in managing of the company,
– The right to participate in the company’s assets in case of liquidation,
– Pre-emptive right to participate in new issues of shares (being issued to increase the company’s capital). This priority is referred to as a pre-emptive right.
The share is a security variable yield. What rights do stockholders have thanks to ownership of shares of the company? Although the stockholder (shareholder) is entitled to participate in the company’s profits, but the company must make a profit so there was something to share. Distribution of income saved up does not have to be (and in fact it is not) the same every year. Hence the definition of shares – floating rate security. Shareholder revenues are different, as different are the results of companies.
Action embodies the risk of capital owners. Property rights of a shareholder in the company (its value) are proportional to the number of shares held. The stock which is after all an instrument of granting of credit on the capital market is a security that is not subject to repayment.
Another feature of the stock deserves a special mention: share as a document confirming participation in the assets of the company has the same degree of protection against inflation processes. The value of shares is in fact based, inter alia, on the value of the assets of the company. That’s why you can say about the share that it is such a financial instrument that protects a shareholder against the effects of inflation.
Income from Shares
Shareholder derives income from his invested capital in shares from two sources:
1. From sharing of the profits of the company, i.e. dividends, in which participates in proportion to the size of its capital share. The dividend is usually paid in cash (cash dividend).
2. From the rise of the share price (at the time when he sells it).
As you can see at a glance (bearing in mind all that has been written above), that these are not absolutely stable source of income because:
– Company may not have a profit,
– The value of shares may fall.