A shareholder is an individual or a corporation that holds the majority of shares in a business by purchasing shares on the stock exchange. Dividends are paid to shareholders whenever the company improves its stock value and profits. Shareholders do not have to personally bear the liabilities or debts of the company, but they take on a risk when they invest.
Shareholders can be classified into two broad groups: those who have common shares, and those who have preferred shares. It is also possible for companies to break these down further on a class basis, with different rights associated with the various classes of shares.
Common shares are typically given to employees as a part of their salary, with the holders enjoying voting rights on matters which affect the business as well as also receiving dividends from the company’s profits. They are ranked after preference shareholders when it comes to the right to assets in liquidation of the company.
Preferred shareholders However, they are not able to take part in the management decisions of the company. They also do not get a fixed dividend, and the rate may change in accordance with the performance of the business in any particular year. They are also paid prior the common share is sold in the event of a company’s liquidation. It is also possible for shareholders to enjoy a number of other rights, such as the right to receive a preference dividend, a special dividend or even no dividend at all.
