Shareholders’ Right to Distribution : A Misnomer

Separate Personality and Limited Liability principles encourage the expansion of corporate businesses. In such businesses the dormant investors invest their idle capital and the active entrepreneurs control the business out of that capital. The former undertake the risk of business and the later manages the business. In return the shareholders expect to share the profit and assets of business. This study analyses that expectation of the shareholders in terms of dividends and assets division at the time of winding up. It further analyses the underlying uncertainties of those returns, the vulnerable position of the shareholders out of such uncertainties, as well as the probable losses suffered by the shareholders and the company. It challenges the use of terminology of RIGHT to DISTRIBUTION to those uncertain returns; it also searches for credible way outs from those uncertainties. The findings result at recommending the use of the term ‘Spes to Distribution’ in the place of Right to Distribution and more shareholder friendly dividend policy