Are Right A Lot

Are Rights A Lot. Or… Not Really.

Can you explain why that specific shareholder is owed the right to make a claim against the company? You seem to say it is simply because they bought some shares, but doesn’t it go beyond that? If they bought the shares, they bought a right to those shares in any case, so if they sold those shares before going to court, they are just having a change of plan and owning shares that belong to someone else (and therefore they should have no rights).

Or do you mean something like: I’m offering to sell you a Porsche, but if you choose not to buy it, I can’t sell it to you because you have a right to a Porsche that I don’t own. Therefore, it would be wrong of me to sell it to you.

(I am exaggerating a little bit. There is no law that says a right has to be “unrestricted” in this way. Also, as I say, it would be pretty much impossible for a company to pay out over £50 million to a shareholder. That’s why you see cases like this every year.)

Yet a concept similar to “unrestricted” can be applied to “the right to spend money on shares”. The website investorsrights.com gives the example of an investor, say Alistair, who has £50,000 in a fund where he earns an annual 6% interest. In this case, he has a right to spend this money on shares.

There is a contract involved. This is where the stock market has given him a right, but someone else is saying they own it, and therefore his right to spend the money on shares is restricted. If Alistair wants to sell, he has to take that money and invest it in another fund, so he doesn’t lose the money.

You may be thinking: so the fact that a shareholder has some money in a company doesn’t necessarily mean they have a “right” to buy shares (because a fund company can say: “if you don’t buy more shares, I can’t sell them to you”).

But this is not an argument, it’s a rhetorical question, which I will answer.

An investor has a right to buy shares, because he’s invested money. You may say: but I can’t argue the fact that the shareholders are all rich – or else, how would you know that they have a right to buy?

Well…

You can’t argue that they have a right to buy shares, because they have a right to buy shares, so why would you be surprised if they invested their money? If they did not, they wouldn’t be rich, and you wouldn’t have said anything.

You’re obviously saying that the person who has £50,000 has a right to spend it on shares. That’s right.

Yet I’m saying that they can’t, because they have a right not to. That’s not what they said. They say they have a right to buy shares, so why are you trying to make an argument that they don’t have a right to buy?

If I said to you: I can eat your hamburger, but if you don’t like it I can make you another one. I don’t know what your response would be.

There are two reasons why I’m not making an argument here. The first is that your lawyer, whose job it is to argue that shareholder rights cannot be restricted, is doing it by referring to his argument about McDonald’s giving you a free hamburger. My point is that McDonald’s does not have the right to give you a free hamburger; you do. (Yes, a McDonald’s representative can try to buy you a hamburger, but it’s a fool’s game, because you have the right not to be bought.)

McDonald’s has a right not to sell you a free hamburger. You have a right not to buy one.

The second reason is because, for all your attempts to argue that shareholder rights cannot be restricted, you have based them entirely on legal concepts of rights (as in the example of McDonald’s). But it’s perfectly obvious that a shareholder has a right to eat his burger.