Protecting your shareholders is a top priority for business owners. So it is because shareholder can help direct the direction of your business and lead to success for everyone involved.
These are some tips that will help you get started.
1. KEEP COMMUNICATION CLEAR
Communicating clearly and often is one of the best ways to protect shareholders and your interests. Without effective communication, investors and businesses will not be able to succeed together.
Both investors and businesses will benefit from good communication. It allows for the identification of the company’s objectives and reduces hostility towards management.
Shareholder engagement should be a part of every ongoing process. For example, you can communicate with shareholders by inviting them to an open Q&A forum. They can ask questions about the business and see if their shares are being protected.
You might be concerned about random questions. Consider emailing ahead to get a general idea of your primary concerns and possible solutions.
Investors should be provided with quarterly updates. It will keep them informed where possible. You could also provide sensitive information about sales and allow them to see the progress of their shares.
2. DON’T SURPRISE SHAREHOLDERS
Don’t surprise your shareholders with any information that could cause them to be hostile.
While you should communicate with shareholders whenever possible, it might not be in your best interests to speak to them about every setback or slowdown. It is especially true if the problem is not easily fixed.
Trustworthiness in shareholders will increase if they are honest over the long term. However, it could be damaged if they are constantly contacted regarding irrelevant matters. Driving good sales and numbers is one of the best ways for shareholders to gain confidence.
3. SAVE YOUR BUSINESS IN CASE OF A SHAREHOLDER’S DEATH
Shareholders of smaller businesses must be protected. As a result, they become seriously ill or die.
The business may be insolvent if a majority shareholder dies. It could mean that the remaining shareholders will not have the money to purchase these shares from their loved ones.
They could be in control of the business, but with minimal experience and while they grieve. It may look elsewhere for a buyer to purchase the shares, leading to them looking for a rival.
Protecting large shareholders by purchasing shareholder protection insurance will ensure that the funds are available to purchase the decedent shareholding in the event of an emergency.
It helps ensure that the business is in good hands and reduces financial pressure on remaining shareholders during difficult times.
4. UNDERSTAND SHAREHOLDERS RIGHTS
To best protect shareholders, you can fully understand their rights and how they affect you. You will be better equipped to protect your commercial interests if you are more informed about shareholder rights.
If empowered enough, shareholders can appoint or fire a director by way of an ordinary resolution. It will require the support of the majority shareholders to approve it.
The shareholders will also be able to request a meeting regarding essential business matters. These meetings can be used primarily to remove or appoint directors. However, they can also be used for special resolutions. These requests are usually directed at the business to make a significant change in direction. For example, they may override the company’s Article of Association. They will require the agreement of at least three-quarters of shareholders.
Some decisions require shareholder approval before they can be implemented. For example, a special resolution will be needed if a company wants to change its name.
Like the above, takeovers are possible for shareholders who hold at least 50% of the voting rights. They can agree to sell their shares and allow for a new company to take over. To ensure that you don’t get thrown out, you need your shareholders to support you.
5. PREPARE FOR UNEXPECTED ISSUES
No matter which industry you work in, it is essential to ensure that your business interests are protected at all costs. You can help your shareholders and yourself by providing a safety net at all times.
It provides security for shareholders and the business. The second type of insurance that is available to business owners is called shareholder protector insurance. This insurance covers what happens to shares if a shareholder dies.
A business doesn’t want shares to be sold to anyone who has no interest or isn’t willing to work with them. Protection insurance is an agreement between the shareholder and the business. It lays out the rules for buyouts and general shareholders.
6. BENEFITS AND REWARDS
Many successful corporations and businesses pay their shareholders benefits and rewards when they make a significant profit. It is a beautiful way to say thanks to shareholders for their support, even when times were difficult.
It will help you keep them on your side and provide shareholders with an incentive to buy more shares and move in dividends.
It’s also a nice thing you can offer and may attract more investment from outside sources. In addition, because they perceive you as a caring company, it could lead to higher-quality talent applying for work.
Disclaimer. The opinions and views expressed in this article are the authors Judge Napolitano.
