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A shareholder or stockholder is an individual or institution (including a corporation) that legally owns a share of stock in a public or private corporation. Shareholders may be referred to as members of a corporation. Legally, a person is not a shareholder in a corporation until his or her name and other details are entered in the corporation's register of members.
Shareholders of a corporation are legally separate from the corporation itself. They are generally not liable for the debts of the corporation; and the shareholders' liability for company debts are said to be limited to the unpaid share price, unless if a shareholder has offered guarantees. The assets of the corporation are not assets of the shareholders. The only entitlement of shareholders is to a dividend declared and paid in accordance with the applicable laws and rules of the corporation, and to a share of the capital of the corporation on winding up.
Shareholders are granted special privileges depending on the class of stock. The board of directors of a corporation generally governs a corporation for the benefit of shareholders.
Subject to the applicable laws and rules of the corporation, other rights of shareholders may include:
- The right to sell their shares.
- The right to vote on the directors nominated by the board of directors.
- The right to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions.
- The right to dividends if they are declared.
- The right to purchase new shares issued by the company.
- The right to what assets remain after a liquidation.
Shareholders are considered by some to be a subset of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, employees, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.
Shareholders in the primary market who buy IPOs provide capital to corporations. However, the vast majority of shareholders are in the secondary market and provide no capital directly to the corporation.
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