Shareholder Voting Rights

by Grygor Scott
Shareholders may have the right to vote on certain corporate matters.

Shareholders may have the right to vote on certain corporate matters.

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Investors who hold a privately held corporation’s shares own a part of the company. Stock ownership gives them certain rights. Provisions in a private corporation’s articles of incorporation, or charter, and its bylaws grant and govern shareholder rights, including the right to vote on corporate resolutions. These provisions, along with state corporation laws, can limit the voting rights of shareholders.

Basic Shareholder Rights

In general, a privately held corporation’s shareholders have the right to inspect corporate records and file lawsuits against the corporation’s officers or board of directors for wrongful acts. When a corporation’s board of directors approves a dividend payout, shareholders have the right to receive their proportion of the dividend funds. Likewise, when a privately held corporation dissolves, shareholders have the right to their fair share of the proceeds from the liquidation of corporate assets. Certain shareholders also have voting rights.

Voting Rights

A corporation's officers and board of directors manage its day-to-day operation. Shareholders have no right to vote on basic management issues. They exert their ownership by voting on key corporate issues. At shareholder meetings, the board presents resolutions involving major matters, such as changes to the charter or election of directors, for shareholder approval. Shareholders usually have one vote per share. The corporation’s charter or bylaws may limit or deny shareholder voting rights. In many corporations, owners of preferred shares have no right to vote.


Most corporate bylaws require a quorum at a shareholder meeting to hold a vote. A quorum is usually reached when the shareholders present or represented at the meeting own more than half of the corporation’s shares. The laws in some states allow the approval of a resolution without a quorum if all shareholders provide a written endorsement of a measure.

Voting Eligibility

In most cases, only a record owner is eligible to vote at a shareholder meeting. Corporate records list all owners of shares on a record date, which is a specified day preceding the shareholder meeting. Shareholders who are not listed in the record on the record date cannot vote.

Taking a Vote

Once a quorum has been established at a shareholder meeting, shareholder voting can proceed. Approval of a resolution usually requires only a simple majority of share votes. A higher percentage of votes may be required for some exceptional resolutions, such as one seeking a merger or the dissolution of the corporation. Shareholders may vote through a proxy, an agent authorized by a shareholder to cast the shareholder’s votes.

Impact of Shareholder Voting Rights

In a large, publicly held corporation, shareholders exert their greatest influence through elections of the corporation’s directors. In many small, privately held corporations, however, minority shareholders often cannot affect the election of directors. The officers and directors in these corporations typically own large blocs of shares. In some cases, one person owns a controlling share of the corporation's stock. Although shareholders in a privately held corporation cannot be denied their right to vote in elections or on resolutions, their votes may have little, if any, impact on major corporate issues.

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