July 17, 2019

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Delaware Shareholders’ Rights

Delaware Law Firms

A shareholder, also referred to as a stockholder, is part owner of a corporation. As a shareholder, you have certain rights and you can take legal action against the corporation if it violates your rights. Different types of shareholders have different rights.

Learn the basics of Delaware shareholders’ rights below:

Basic Delaware Shareholders’ Rights

Some basic shareholder’s rights, in Delaware, include the right to:

  • Transfer ownership of stock
  • Sue the corporation for wrongful acts
  • Change the bylaws
  • Inspect the corporation’s books and records
  • Inspect shareholder register within ten days of a meeting
  • Meet annually to elect directors
  • Vote on constitutional amendments
  • Approve the sale or dissolution of the corporation
  • If dissenting from a merger, the right to be bought out at fair value
  • Freedom from liability for corporate debts
  • Receive remaining assets after liquidation

Shareholder Inspection Rights

As an owner of the corporation, any shareholder has the right to inspect its books and records, including the corporation’s stock ledger, list of its stockholders, and other books and records, for a proper purpose.

The shareholder must make a written request under oath. The request must include the specific documents to be inspected and the purpose of the inspection. The inspection can be conducted in person or by an attorney or agent of the shareholder. The inspection must take place during normal business hours for the corporation, but copies of the documents can be made.

Common vs. Preferred Stocks

By law, each share of common stock carries one vote. Premium stocks typically do not carry voting rights, but have other benefits. Premium stockholders have priority over common stock holders in receiving dividends and remaining assets after liquidation.

Minority vs. Majority Shareholders

A majority shareholder is an individual or entity which owns more than half of a corporation’s outstanding shares, and therefore has significant control over the company. Sometimes, majority shareholder refers to one of a small group of shareholders who collectively own more than half of the company’s outstanding shares.

Minority Shareholder Oppression

Minority shareholder oppression can occur in publicly traded corporations, but most often occurs in closely-held corporations.

Many states offer statutory protection from minority shareholder oppression. Delaware does not and the courts have gone back and forth on the issue. However, minority shareholders can still bring claims which are equivalent to shareholder oppression based on other legal principles.