What Is Shareholder? Types, Roles & Rights of Shareholders with Example

What is Shareholder?

Shareholders are individuals, firms, or entities that own shares of a certain enterprise. To have partial ownership, a shareholder has to own at least a portion of a company's equity or managed funds. Dividends are usually paid to shareholders if the firm is doing well and developing.

Understanding Shareholder

Shareholders have partial ownership of a particular company. A majority shareholder is the one who possesses more than half of a firm's share capital. Minority shareholders, on the other hand, are individuals who own less than 50% of an ownership interest.

Types of Shareholders

The common and preferred shareholders are the two types of shareholders.

1. A company's common stock is owned by Common Shareholders. They get the ability to vote on issues that affect the corporation. They will have the power to approach a tier complaint against the firm for any misconduct that could affect the business because they have power over how it is handled.
2. Preferred Shareholders, on the other hand, are rather uncommon. They too have a share of the firm's preference shares but have no right to vote or voice in how the organization functions, unlike normal shareholders. They are, therefore, guaranteed a predetermined annualized return, which they will get before the common stockholders are given their portion.

Roles and Responsibilities of the Shareholder

• Following the correct procedures on the directors' remuneration.
• Choosing the authorities that will be granted to the board of directors of the company.
• Making judgments about the firm's constitution amendments.
• Keeping an eye on the company's annual report.

Rights of the Shareholder

• The right to see the firm's files and records.
• The ability to vote on business concerns including director nominations.
• The ability to vote via proxies, by mail, or through internet voting systems.
• The right to collect revenues from the corporation as payouts.
• If the business goes bankrupt, you have the right to an equal distribution of the profits.
• The ability to sue the company for the actions of its supervisory board.

Practical Example

Luna is a jobholder who seeks to invest her money or buy shares in the partial ownership of a company and gain some profits. She researched and decided to buy shares from a reputable company. As she holds shares of that particular company, she is a shareholder of that firm. 

In Sentences

• Any individual, organization, or entity that holds shares in companies is referred to as a shareholder.
• As owners of a company, shareholders are entitled to investment income (or losses) and/or dividend payments.