Do Shareholders of a Corporation Own the Property of a Corporation? | MinuteBox Cloud Entity Management

Do Shareholders of a Corporation Own the Property of a Corporation?

Corporations are separate legal entities from the persons (which may include individuals or other corporations) that own them. Although the corporation will be owned by other persons, those persons do not actually own the property of the corporation, this belongs to the corporation itself, which has the characteristic of being able to legally own property.

The shareholders of the corporation, instead, own “shares” of the corporation and which represent their ownership interest. The shares will belong to a “class” of shares that themselves have a set of characteristics outlining the rights and obligations belonging to the owners of that particular class of shares.

The list of corporate shareholders is typically found within the “corporate minute book” or “corporate record book” in the “shareholder’s ledger”. This ledger tracks the persons (individual or corporate) that own shares in the corporation. The particular rights associated with a class of shares can, usually, be found in the corporation’s Articles of Incorporation, which is also found in the corporate minute book.

During the life of a corporation, the directing minds or shareholders may wish to modify the rights of shareholders. This process is may be done by a resolution of the directors or by the shareholders themselves (depending on the rules that are already in place to govern the corporation). In any case, any changes made to the rights belonging to different classes of shareholders should also be found in the corporate minute books.

An owner of shares in a corporation may be able to realize the value of property owned by the corporation if the corporation earns an income or capital gain from that property and decides to pay a dividend to the shareholders.

Many individuals find it difficult to understand that, although they own “shares” in a company, they do not “own” the property owned by that company. One of the benefits of a corporation being a separate legal entity, however, is that although the owner is not per se entitled to the property or assets of a corporation, the owner is likewise not obliged to the debts or liabilities of a corporation.

To summarize, the rights and liabilities of shareholders are separate and distinct from the rights and liabilities of the corporation to which those shares derive. This means that although a person may be the owner of shares in a corporation, they do not, in turn, own or have per se rights to the property owned by that corporation. Likewise, the owner is not per se responsible for the debts of a corporation (i.e. a shareholder could act as a guarantor for corporate debts in her or her individual capacity).