Relationship between the Managerial Committee and the Shareholders - Essay Example

? Company Law For any upcoming enterprise, it is very important that a strong relationship exists between the managerial committee and the shareholders. This is because the shareholders are responsible for the market value of the company citing the fact that they are the investors in the company. The managerial team is also important because without this team responsible for the daily running of the company, rules and regulations would not be followed and consequently the company would land into many debts and law suits. It is thus important to go through the strengths and weaknesses that the constitution has set in place with regard to the rights of shareholders. Contemporary legal provisions have it that shareholders who are also known as the owners of the company have the advantage of not being disturbed by the various issues that the company may have with regard to the managerial process and also with regard to the manner in which it does in the forex market if the company is public1. It is important to recognize that this comes in as strength in the legal provision as the shareholders have the privilege of indulging in other activities that they may have. The legal provision however states that it is the rights of the shareholders to get information regarding the company upon their request in a bid to recognize or rather manage their investments2. The contemporary law however does not provide for certain factors that ought to come in as a major importance to the company. One of these factors is the amount of money that shareholders ought to get. According to the law, any company after making profits ought to put in some of the money to the companies running for the purpose of acquiring new stock and other managerial tasks. However, shareholders ought to get a certain share of the company’s earnings in a rather precise manner. This is from the fact that shareholders are the owners of the business and their interest ought to come prior to anything else. The law is weak in this area because that it does not provide for this. This is otherwise known as the conduit solution. The conduit solution would work effectively provided the fact that it would minimize the amount of loss that the shareholders would face. The power of the shareholders would increase from the fact that their investments would be brought back in terms of dividends3. Despite the various weaknesses identified in the law, there are strengths that it has with regard to class rights of the shareholder. One of the strengths is the fact that the shareholder has the right to apply for an appeal in the case of a variation being cancelled4. Variation identifies the contemporary strength of the company under review and the shareholders might get inclined to inquire about the state of the company through this method. Shareholders do this in an effort to identify how his contribution or rather investment is doing in case they seek to get dividends. It is the right of each shareholder to have this power and failure of the company to allow the shareholder to do this might get them seeking legal justice5. However, this only applies to people who hold above 15% of the company’s shares. This is because some shareholders might hold a very minimal amount of shares in the company and consequently make decisions that may affect the company’s running and best interest. There is strength in the legal system in the fact that it provides for the right of the shareholder to vote. There are many times that a company might get faced by very difficult decisions concerning the eligibility of some of the working conditions and market prices of their commodities. The law provides for the shareholders to engage with the management team of the company in that they can vote in a major decision making conquest. The law however does not suggest a clear approach with regard to the class right of a shareholder attending the meetings6. The law states that it is not always appropriate for the shareholders to attend all the meetings. This is from the fact that there are times when shareholders may come into a meeting and offer their views in a manner that would not have the company’s best interest at hand. At times this may happen due to sheer negligence on the side of the shareholder who wants to take advantage or at times this may be due to a shareholder not being informed on such matters7. It is at such times that the class rights of the shareholders are not fully stipulated and consequently not implemented from the fact that this may bring difficult issues in the running of the company. It thus becomes necessary that only the top managers with adverse experience in the field get to attend the meeting and discuss the matters in hand. It is also important to recognize that the low has a weakness in the fact that it does not support the rights of minority shareholders. There comes a time that the business may decide on selling its shares. This makes it important for the company to offer dividends to shareholders but only at a temporary basis. This usually has the minority shareholders overlooked as only the major shareholders with a large percent of shares in the company get to enjoy the dividend. This is a weakness provided the fact that these people that are paid huge sums of money as dividends already have other amounts of money sitting in their bank accounts8. This is a situation where the rich get to enjoy larger sums of money while the poor characters get to have their money in the company until they either reach a substantial amount to ask for dividends or the company makes huge profits in a manner that it might consider offering its minority shareholders dividends. This concept is negative from the fact that majority of the people that have shares in a company are the less financially capable people in the society9. A strength that the system has with regard to the priority rights of the company. There are times when share capital of a company increases and this might not have come from the combination of both bonds issue and share conversion, then the priority is offered to the new capital10. This comes in as a very important factor to observe provided the fact that the dividends in this case go with priority to the existing shareholders of the company at the initial time of profit accrued from the investments made. This is strength from the fact that the company gets to reward those class shareholders that had existed in the company from the beginning and does not have bias in terms of the wealth or the amount of shares that a certain individual bears. There is also the right of the shareholders of a certain class to receive financial statements and other audits from the firm’s financial officer11. This is very important from the fact that individuals get to look at the stock prices of the company’s assets and capital and then decide on whether to sell their individual shares or wait for a time when the shares would be even better placed in the market. This comes in as strength as it applies to shareholders that have existed in the company for more than six months. The new shareholders do not get this privilege because the company’s executive does not know the ulterior motive of the shareholder and he is yet to be trusted by the company. It is important to recognize the fact that shareholders have the right to the product of liquidation. There are many times that a company may fail to deliver to the society and this would lead to loss accumulation. There are also times that the company may find the economy rather rough and opt for the sale of the major assets that it has. This liquidation does not mean that the shareholders lose all the investments that they had. The law provides that in the case of liquidation, the shareholders have the right to claim the income from the result of any business activity that the company had indulged in an effort to save anything in the company12. The result of liquidation does not necessarily mean that the company is supposed to get all that it had put in as investment. The company is supposed to repay the shareholders with regard to the percentage of money or investment that they had initially put into the company13. Shareholders are the most important characters in the running of the company. Class rights are very important to observe because any misunderstanding between the management and the shareholders may result to the company running into many debts. This is an effect that neither the shareholder nor the management of the company is ready to face. It is thus vital to observe and understand the various provisions set by the government with relation to this. References Admin, D. (n.d.). Austlii Education - Home. Austlii Education - Home. Retrieved April 16, 2013, from www.austlii.edu.au Admin, S. (2009, January 1). CQUniversity Australia - Home. CQUniversity Australia - Home. Retrieved April 20, 2013, from http://www.cqu.edu.au/ Aiden, H. (2009, July 16). Professional Negligence in The Construction Field. Monday Business Briefing, p. 48. Mundo, D. (2005, August 24). Civil Liability for Secondary Market Disclosure. Monday Business Briefing, p. 54. Neville, J. (2012, February 24). 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