Answer:
Shareholders can't force the directors or top managers to act to compensate a wrong agonized by the organization, but if the directors decline to act, the shareholders may act on behalf of the organization by filing.
This is known as a shareholder's imitative suit. Any loses recovered by the suit usually go into the organization's treasury instead of shareholders personal account.
Answer:
Directors:
Directors of the company are the personnel who lie in the top of the hierarchy and are ultimate authority in the every company. Directors are responsible for all policy making and they take decision regarding the policies and other affairs of the company like declaration of dividends and other.
Duty of directors:
Directors of the company have following duties:
1. Duty to exercise reasonable supervision: Directors are required to exercise adequate amount of supervision while delegating the responsibility or work to other officials and employees.
2. Duty of care: Directors have the duty to take adequate care while carrying any work. It is the duty of director to act in good faith as he has a fiduciary relation with the company.
3. Duty of loyalty: Directors have the duty of loyalty which state that directors must keep the interest of company superior to their personnel interest and must use the funds for welfare of the company.
Answer:
Dividends:
Dividends are the part of the profits earned by the company and paid to the shareholder according to the orders of directors. Generally dividends can be paid in form of cash, stock and property.
Sources of dividends from which dividends can be paid:
1. Retain earning:
Some laws permit the distribution of dividends from Retain earning and it is the part of profit that remains undistributed and is kept by the company for meeting the future contingencies. It includes the capital gain which is earned from the sale of fixed assets.
2. Net profits:
Some laws permit the distribution of dividends from the profit of current year irrespective of the deficit of previous year.
3. Surplus:
Dividend can also be paid from the surplus earned.
When dividend is paid at the time of insolvency, or paid from any unauthorized account can be termed as illegal dividends. Shareholders are required to return the dividend that has been paid by illegally.
In case dividends are paid illegally then directors are held personally liable for the amount paid.