14. Rights of Shareholders & Annual General Meeting

Question 1

Outline the definition of preference shares

(don’t need to know)

Answer 1

• have one or more rights attached to them that are not attached to ordinary shares
• the usual right of preference shareholders is the right to receive a fixed rate of dividend

Question 2

Outline the definition of ordinary shares

(don’t need to know)

Answer 2

• have no special rights
• ordinary shareholders do NOT have a right to a dividend at a fixed rate

Question 3

Outline the 4 main rights of ordinary shareholders

Answer 3

• if a company is liquidated, the ordinary shareholders are entitled to the repayment of their capital after all the creditors have been paid
• the right to vote at meetings of shareholders and to elect the directors of the company
• the right to receive a copy of the annual financial report of the company
• the right to receive a dividend once the dividend has been approved for payment

Question 4

Explain what is an annual general meeting

(don’t need to know)

Answer 4

• every public company that has more than one shareholder must hold an annual meeting of the shareholders and the directors
• this meeting is known as the annual general meeting
• the annual general meeting gives the shareholders the opportunity to question the directors about the performance of the company over the previous 12 months
• the shareholders also elect the directors and, if required by the constitution of the company, approve a final dividend recommendedby the directors