(Student’s Name)
Any corporation by the authorization of its charter can issue a specific number of units called “stocks” which represent a certain level of ownership in the corporation. Such stocks can broadly be classified into Common stocks and Preferred stocks (Pandey, 1996). The purchasers of common stocks are known as Common stockholders. The corporation that issues the stocks grants certain rights its stock holders in order to safeguard their ownership. The rights provided by the corporation to their common stockholders are as discussed below.
The common stockholders are entitled to receive a stock certificate as an acknowledgement of their corresponding ownership in the corporation. They possess the right to vote at a stockholders meeting and also receive the annual reports in order to scrutinize the functioning and affairs of the corporation. The common stockholders even possess the right to inspect the minutes of meetings of the board of directors. They are entitled to be preferred by the corporation while issuing any additional units of common stock. They possess the right to receive dividends on the stock units that they hold and also to sell those units over/under par value. In the event of liquidation of the corporation, the common stockholders also possess the right to share the proceeds in the sale of the assets of the corporation after the creditors and the preferential stockholders are paid off.
The common stockholders hold the right to vote for the election of the board of directors of the corporation. It is this board of directors who exercise ultimate control over the functioning of the corporation (Van, Home James C, 1971, p. 538). Therefore common stockholders are considered as the actual owners of the corporations.
References
1. Pandey, I.M. (1996). Financial Management. New Delhi: Vikas Publishing House.
2. Paul, M. Van Arsdell. (1968). Corporation Finance, Policy, Planning and Administration. New York: The Ronal Press Company.
3. Van, Home James C. (1971). Fundamentals of Financial Management. New Jersey: Prentice Hall Inc.
