Answer to Question #218636 in Economics for arshdeep

Question

 

Question 1. Discuss the characteristics of the corporate form of organisation, rights of shareholders, and different types of shares. 

Answer 1

A corporation is a structure established wherein different parties come together and each provides capital, labor or expertise to maximize profits for all of them.

Characteristics of Corporations:

• Separate Legal Existence.
• Continuous Life.
• Ability to Acquire Capital.
• Transferability.
• Limited Liability.
• Government Regulations.
• Taxation.
• Governance and Management.

Common shareholders are granted six rights: voting power, ownership, the right to transfer ownership, dividends, the right to inspect corporate documents, and the right to sue for wrongful acts.

Types of shares are:

• Preference shares give certain preferential rights as compared to other types of share.
• Equity shares. This type of share is traded actively in the secondary or stock market. These shareholders have voting rights in the company meetings. 
• Differential Voting Right (DVR) shares. The DVR shareholders have less voting rights compared to equity shareholders. To dilute the voting privileges, companies provide extra dividend to DVR shareholders.