A stock is represented by a stock certificate. This is proof of your ownership. In today's computer age, you won't actually get to see this document because your brokerage keeps these records electronically (De-MATerialised account). This is done to make the shares easier to trade. In the past, when a person wanted to sell his or her shares, that person physically took the certificates down to the brokerage. Now, trading with a click of the mouse or a phone call makes life easier for everybody. Being a shareholder of a public company does not mean you have a say in the day-to-day running of the business. Instead, one vote per share to elect the board of directors at annual meetings is the extent to which you have a say in the company. The management of the company is supposed to increase the value of the firm for shareholders. If this doesn't happen, the shareholders can vote to have the management removed. In reality, individual investors like you and I don't own enough shares to have a material influence on the company. It's really the large institutional investors and billionaire entrepreneurs who make the decisions.The importance of being a shareholder is that you are entitled to a portion of the company’s profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you own, the larger the portion of the profits you get. Your claim on assets is only relevant if a company goes bankrupt. This last point is worth repeating: the importance of stock ownership is your claim on assets and earnings.
Another extremely important feature of stock is its limited liability, which means that, as an owner of a stock, you are not personally liable if the company is not able to pay its debts. While stocks give owners certain rights, they do not carry obligation in case the company defaults or faces a lawsuit. In a worst-case scenario the stock will become worthless but that is the limit to the investor's liability. Other companies such as partnerships are set up so that if the partnership goes bankrupt the creditors can come after the partners (shareholders) personally and sell off their house, car, furniture, etc. Owning stock means that, no matter what, the maximum value you can lose is the value of your investment. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.
What are my rights as a shareholder?
• To receive the share certificates, on allotment or transfer (if opted for transaction in physical mode) as the case may be, in due time.
• To receive copies of the Annual Report containing the Balance Sheet, the Profit & Loss account and the Auditor’s Report.
• To participate and vote in general meetings either personally or through proxy.
• To receive dividends in due time once approved in general meetings.
• To receive corporate benefits like rights, bonus, etc. once approved.
• To apply to Company Law Board (CLB) to call or direct the Annual General Meeting.
• To inspect the minute books of the general meetings and to receive copies thereof.
• To proceed against the company by way of civil or criminal proceedings.
• To apply for the winding up of the company.
• To receive the residual proceeds.
• To demand a poll on any resolution.
• To apply to CLB to investigate the affairs of the company.
• To apply to CLB for relief in cases of oppression and/or mismanagement.
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