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Know Your Rights When You Hold Common Stocks

Aug 2, 2008
Common stocks are shares in companies that represent ownership in the company. If you do hold this kind of stock, then you do have a right to play a part in electing a board of directors and in voting on corporate policies, even though these stockholders are pretty low on the ladder when it comes to ownership issues. Should the company go out of business the common stockholders will only have any access to the assets once the debts have been paid in full and the bondholders and preferred stockholders receive their shares.

In order to determine where you lie with a company as a common stockholder, you have to look at the hierarchial order of the company. Just because you have stock in a company that owns a theme park, for example, doesn't mean that you can avail of the services for free. You have to pay just like any other customer. Bonds and preferred stick holders take precedence over you because you are the low man on the totem pole when it comes to the company's structure.

However, when the company gains, so do you. You do have six main rights when you hold stock in a company. These are:

1. Voting privileges. This refers to electing people to sit on the Board of Directors and on any issues that would mean fundamental changes to the company. As a stockholder, you will receive notification of the time and date of the voting meeting. If you are unable to attend and have a strong opinion on the matter, then you do have the right to vote by proxy, which generally means you can mail in your vote.

2. You Are an Owner. However small your stock may be you are still part of the ownership of the company. You do have a claim on the assets the company owns. If the company does go bankrupt, you could come in for a share of the sale and when the company has a large profit, you could receive a dividend check.

3. Trade Stock. You are permitted to trade your stock in a company on a stock market exchange. This will give you liquidity and this is very important. This will turn your chares into instant cash that you can move into other areas.

4. Dividends. You are entitled to receive dividends from the profit the company earns. Usually companies prefer that you reinvest the money you earn to purchase more shares because this gives the company more capital to work with. However, if you prefer you will receive a dividend check in the mail. However, the Board of Directors decides how much of a dividend you receive and you don't have any say in this.

5. Inspect the Books. As a stockholder you do have the right to inspect the company's books and financial records. This doesn't mean that you can just go into the company and demand to see this information. The company will publish an annual report detailing all of its income, expenditure, profit and loss.

6. Sue for Wrongful Act. This is usually part of a class-action suit against a company that has wronged its shareholders.
About the Author
For more information on common stock as well as lots of nbsp;free stock tips and information on understanding cash flow statement visit http://www.TradingSphere.com
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