Explanation of a shareholder voting rights provision | Motilal Oswal

shareholder voting rights provision

Introduction

 

In the stock market today, investors are often looking for investment opportunities that bring them the maximum benefits with the minimum risk- being in line with their risk-reward threshold.

 

While online trading, the creation of a balanced portfolio is very important. The investments should not only be diverse but at the same also provide various different kinds of benefits to the investors. 

 

Some investments are made to reap high rewards while also having a really high risk, while others are made with the intention of gaining the investors a fixed and stable income. But these aren’t the only kinds of benefits that investments can give to the investors. Let us take a look at shareholder voting and what it means for investors- 

 

About Shareholder voting

 

In the paradigm of the stock market today, it is not just enough for investments to have the potential to reap high benefits for investors or earn them a stable income, it should also provide them with certain other benefits. One such benefit is shareholder voting. 

 

Shareholder voting is essentially the right to vote on crucial matters of the corporation that its shareholders are given for being owners of the company. 

 

These matters are not just limited to corporate policies and decisions regarding the composition of the board of directors of the company but also other matters such as financial investment and operational decisions- further issue of securities, approval of dividends, acquiring other firms or mergers, making changes in the operational capabilities of the company. 

 

But one thing to be noted is that unlike governmental bodies that follow a single vote per person policy, the voting power or simply the number of votes of a shareholder is directly proportional to the amount of shares that they own. 

 

For example, if a particular shareholder owns in excess of 50% of a company’s shares, then in this case they have a majority vote or a controlling interest in this company and can have a huge impact on this company’s policies and decisions moving forward. 

 

Although shareholders get to vote on a myriad of things regarding the corporation, the day-to-day operations of the firm are left to its appointed board of directors- who manage the firm in its everyday operations. 

 

Conclusion 

 

With this, we can finally understand the importance of non-monetary benefits, specifically shareholder voting, to investors’ portfolios in the stock market today and how it can actually affect their decision to put their money in a certain investment opportunity

 

Shareholer voting rights can help an investor influence the financial and operational decisions of the company they have invested in, often times leading to the potential of them making a lot more money in future as their best interests are taken care of. 

These interests can come in the form of dividend distribution decisions, choosing a board of directors that the investor has faith in or even acquiring a potentially profitable venture etc. 

 

So a big thing for investors  to consider while online trading is the auxiliary benefits- like voting rights,  that their investment can bring them. 

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