YOUR RIGHTS AS A SHAREHOLDER

                                            YOUR RIGHTS AS A SHAREHOLDER
General Shareholder Rights
The rights of shareholders depend heavily on a particular company's articles of incorporation and bylaws. However, in a typical company, a purchase of company stock carries certain basic rights for the shareholder. Purchasers of "common" stock will receive the right to vote on the membership of the board of directors and other critical company matters, and the right to receive dividends if the board declares them. Purchasers of "preferred" stock generally have the right to receive regular dividends, with priority over common shareholders if a limited amount of dividends are available. Preferred shareholders usually won't have voting rights unless the board fails to declare dividends for a considerable time period.

Closely Held Businesses
Most businesses in the United States are closely held. As the name suggests, a closely held business is usually one in which the ownership of the business is held by only a few. Each state has established its own law regarding what constitutes a closely held corporation, but the requirements are generally similar. In Massachusetts, for example, a closely held corporation requires a "limited" number of stockholders, but the number of owners is not the only requirement. The law will also look for a lack of liquidity in the market for the corporation's stock, and extensive participation by the stockholders in running the business.

Fiduciary Duties
Because of the concentrated ownership in a closely held corporation, and the fact that it's more difficult to sell closely held stock with an illiquid market, the law has enacted certain protections for minority shareholders in these corporations. Many jurisdictions' laws prevent the majority shareholder from engaging in certain actions termed "minority freeze-outs." Among other actions, these may include: denying the minority shareholder employment in the corporation; using a contract to escape his legal duties to the minority shareholder; refusing to declare dividends; or causing the corporation to offer discounted prices for assets to the minority shareholder. Some state laws even mandate corporate dissolution upon a finding of majority oppression.

Voting Requirements
In many closely held corporations, an ongoing problem is the minority shareholder's difficulty in having his voice heard. Some companies address this problem by setting high voting requirements, both in terms of the required quorum for the vote and the required number of votes needed to pass a measure. Some companies even require unanimity to pass a vote, although many state courts and legislatures have rejected this approach