A shareholder (aka a stockholder) is an individual or institution, including a corporation,that legally owns one or more shares 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 their name and other details are entered in the corporation‘s register of shareholders or members. A beneficial shareholder is the person that has the economic benefit of ownership of the shares, while a nominee shareholder is the person who is on the corporation’s register as the owner while being in fact acting for the benefit and at the direction of the beneficiary, whether disclosed or not.
The corporation is not required to record the beneficial ownership of a shareholding, only the owner as recorded on the register. When more than one person are on the record as owners of a shareholding, the first one on the record is taken to have control of the shareholding, and all correspondence and communication by the company will be with that person. 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 influence of a shareholder on the business is determined by the shareholding percentage owned.
Shareholders may be granted special privileges depending on a share class. The board of directors of a corporation generally governs a corporation for the benefit of shareholders.
Subject to the applicable laws, the rules of the corporation and any shareholders’ agreement, shareholders may have the right:
- to sell their shares.
- to vote on the directors nominated by the board of directors.
- to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions.
- to vote on mergers and changes to the corporate charter.
- to dividends if they are declared.
- to access certain information; for publicly-traded companies, this information is normally publicly available.
- to sue the company for violation of fiduciary duty.
- to purchase new shares issued by the company.
- 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 may have acquired their shares in the primary market by subscribing to the IPOs and thus provided capital to the corporation. However, most shareholders acquire shares in the secondary market and provided no capital directly to the corporation.
Primarily, there are two types of shareholders.
An individual or an institution can be a common shareholder who owns common shares within a company. This type of shareholding is more common. Common shareholders have the right to influence decisions concerning the company and can file class action lawsuits in case any wrongdoing happens.
A preferred shareholder is rare. In this, the shareholder is paid a fixed sum of dividend even before the common shareholders and they have no voting rights within the company.
|Wikiquote has quotations related to: Shareholder|
- Beneficial owner
- Business valuation
- Class action
- Class A share
- Class B share
- Corporate governance
- Real party in interest
- Shareholder value
- Fontinelle, Amy (26 November 2003). "Shareholder". investopedia.com.
- "What Is A Shareholder: Meaning and Definition". capital.com. Retrieved 2019-02-19.
- Velasco, Julian (2006). "The Fundamental Rights of the Shareholder" (PDF). UC Davis L. Rev. 40: 407–467. Retrieved 16 April 2018.
- "Shareholder - Definition, Roles, and Types of Shareholders". Corporate Finance Institute. Retrieved 2019-02-19.