What Rights Should An Investor Have As A Stockholder?
The rights an investor should have as a stockholder depend, in large part, on the type of security being purchased and the nature of the investment. Investments can take the form of a majority or minority equity position in a target company, or ownership of all the equity. In the case of an investment resulting in ownership of a majority or all of the equity in a target company, the investor’s control position and ability to designate the directors of the target company mitigate or eliminate the need for contractual protections for the investment. However, when an investor obtains a minority equity position in a target company, it is advisable for the investor to obtain contractual protections associated with the investment. This protection is often achieved through the purchase of preferred stock containing various rights and preferences or through a stockholders’ or investors’ rights agreement. The following are some of the rights that an investor should consider: (a) voting rights –
