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Understanding shareholder rights

A company’s value can be directly harmed by unscrupulous actions committed by a director, CEO, or other high-ranking official within the company. When that company is owned by shareholders, those shareholders can seek legal action against the director or officer that has damaged the company through breach of duty or contract. Shareholders in California can recover personal damages that are caused by company officers who commit unprofessional acts.

Knowing your role

The role each individual plays within the company is directly related to whether or not damages can be recovered through litigation. Shareholders, also referred to as stockholders, are the people who own the stock in the company. Their money makes the operation run, and in return they receive a certain percentage of stock in the company.

The business’ directors have a fiduciary responsibility to the shareholders and the company itself. Directors are not the same as officers, who run the day to day governance of the business’s operations.

Rights and roles

In addition to receiving a portion of ownership within the company and the dividends that come with said ownership, shareholders also receive the right to pursue legal action against directors or officers who act in a way that damages the value of the company. It is important to note that the shareholder who is seeking financial damages must provide proof that they provided the company’s leadership of the alleged improper conduct in writing. The shareholder also must prove that they had ownership in the company when the improper conduct occurred as well as maintain that ownership throughout the litigation.

Finding an attorney who is well-versed in civil and business litigation is an imperative part of recovering damages in business disputes. This attorney can compare the conduct that has occurred to the laws and statutes of their state and help their client decide how much financial compensation they are owed due to the actions of the company officer.