Shareholders have various rights within the corporation, which can include the right to:
Dividends (which is a payment made to shareholders based on the company's profits)
Vote (to implement changes or to elect directors or officers)
Transfer ownership (by transferring or selling shares)
Review company records
Shareholder rights also encompass how shares will be treated in the event that a shareholder wishes to exit the corporation. Some common clauses that handle how shares are transferred under such circumstances include: Right of first refusal clause: This clause comes into effect when a shareholder wishes to sell their shares. Right of first refusal means they must first offer to sell their shares to other shareholders at a fair value. If the shareholders cannot purchase them, the selling shareholder can offer them to a third party. Shotgun clause: A shotgun exit provision, also called a buy-sell agreement, may be used in the event of a shareholder dispute. It specifies that one shareholder can offer to buy another shareholder's shares. The shareholder who was approached with the offer can then either agree to be bought out or buy out the first shareholder's shares at the offered price. Tag along clause: Also referred to as piggyback rights, a tag along clause typically applies to majority shareholders who intend to sell a significant portion of their shares or to a proposed sale that will result in a third party becoming a majority shareholder. It protects minority shareholders because a buyer must also purchase their shares at the same price as shares owned by a majority shareholder (therefore meaning they've agreed to purchase all the shares).