InvestorQ : When I buy shares and become a shareholder of a company, what are my rights as an investor?
Dawn Cherian made post

When I buy shares and become a shareholder of a company, what are my rights as an investor?

Juvina Maggie answered.
2 years ago

As an investor, you are eligible to a variety of inalienable rights, which empower to enjoy your ownership without fetters. Here are some of your key rights as an investor in a company.

Firstly, as an investor you are entitled to receive the credit of the shares in your demat account. These shares may be purchased in the secondary market or from the IPO market. In both the cases, the investor will get demat credit for the shares in the demat account. The issue of fresh physical certificates and physical transfers have been stopped from 5th December 2018 and hence all share delivery has to happen in demat mode only. The demat account is proof that you actually own the shares and enjoy all the concomitant benefits.

Secondly, shareholders are also entitled to dematerialize physical shares by opening a DP account with any recognized depository participant. This is of course subject to the company shares being admitted to dematerialization and unique ISIN allotted. You can get this list of admitted shares with ISIN numbers from the website of NSDL or CDSL, the two principal depositories. Investors also have the option to rematerialize these shares and hold them in physical form, despite the limitations.

Thirdly, as shareholders of the company, you are entitled to receive copies of the Annual Report containing the balance sheet, the profit & loss account, the cash flow statement and the Auditor’s Report. Nowadays, annual reports are sent in electronic form which you can download and keep for your records.

Fourthly, as a shareholder you are also entitled to participate and vote in the annual general meetings (AGM) either personally or through proxy. Investors are also free to vote for or against any resolution based on their best judgement. Nobody can stop you from voting on any resolution nor can anyone influence your vote.

Fifthly, we come to corporate actions, which is an inalienable right of shareholders. As an investor, you are entitled to receive dividends in due time once approved in general meetings and paid out of (net of DDT). Nowadays dividends are directly credited to the mapped bank account of the shareholder. Similarly, the shareholder is also entitled to receive automatic credit in the demat account for bonus issues, stock splits, mergers and other corporate actions. These are automatic. You are also entitled to bid for rights, buyback of shares etc.

Shareholders, as investors in a company, are entitled to inspect the statutory registers at the registered office of the company by giving advance intimation to the company in which the investors hold shares.

Apart from automatic corporate actions there are also some corporate actions that are voluntary and subject to your discretion. You are entitled to receive an offer to subscribe to / participate in special voluntary actions like rights issues and buyback of shares. The shareholder has the full discretion to decide upon whether they want to participate in these issues or not.

In case the shareholders are unhappy with certain aspects of a company’s functioning, the shareholders can apply to the Company Law Board (CLB) to call or direct the Annual General Meeting with requisite number of shareholders. In addition, shareholders of a company are also entitled to inspect the minute books of the general meetings (AGMs and EGMs) and to receive copies of the same for their perusal and records.

Last but not the least, in very extreme cases the shareholder of the company are also entitled to legally proceed against the company by way of civil or criminal proceedings. In a worst case scenario, the shareholders, with requisite numbers, can also apply for the winding up of the company. In the event of any winding up or debt settlement by the company, the shareholder investors are entitled to receive residual proceeds from the process. All the above rights are inalienable to you as an individual shareholder.