Shareholders are the people who jointly own a company. People become shareholders in a company after they acquire some shares in the business. Although shareholders are not involved in the day to day activities of the company, they play some vital roles. Most of the decisions that shareholders make in a company affect the future of the company. For instance, if there is a decision that affects the goals of the firm, shareholders are invited.
Changes to the Constitution
The constitution governs the daily running of a company, and hence, shareholders have to be involved when rules are changed. The shareholder’s vote on whether a particular change should be made or not. Even though the board of directors is more involved with the company’s daily routines, the shareholders share in the profits or losses that the company accrues. Also, the shareholders can bring up suggestions to change the constitution; for example, introducing changes to make the company greener.
Board members are responsible for declaring dividends. However, shareholders must be present when such an event occurs. When a dividend is affirmed, the equivalent amount is reduced from the retained earnings and the liability account increases. On the other hand, when dividends are paid, the liability accounts decrease, and the cash balance reduces. These bonus issues also affect the company at large, which is why shareholders must be present. Besides, such transactions are also recorded in the company’s books for future reference.
Financial Statements Approval
When buying shares into the corporation, the shareholders contribute to the capital of the firm. Therefore, when a budget is made, the shareholders can either approve or deny it. Also, after projects are completed, or after a fixed span, a financial statement is drawn to represent how various funds were used. Shareholders inspect the transactions to ensure that funds were used correctly.