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A shareholder (in the United States often referred to as stockholder) of a
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
is an
individual An individual is that which exists as a distinct entity An entity is something that exists as itself, as a subject or as an object, actually or potentially, concretely or abstractly, physically or not. It need not be of material existence. In ...
or
legal entity In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, lawsuit, sue and be sued, ownership, own property, and so o ...
(such as another
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
, a
body politic The body politic is a polity—such as a city, realm, or state (polity), state—considered metaphorically as a physical body. Historically, the sovereign is typically portrayed as the body's head, and the analogy may also be extended to other a ...
, a trust or
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, business entity, businesses, interest-based organizations, schoo ...
) that is registered by the corporation as the legal owner of
shares In finance, financial markets, a share is a unit of Equity (finance), equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers t ...
of the
share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's Shareholders' equity, equity that has been derived by the issue of Share (finance), shares in the corporation to a shareh ...
of a
public In public relations and communication science, publics are groups of individual people, and the public (a.k.a. the general public) is the totality of such groupings. This is a different concept to the sociology, sociological concept of the ''Öf ...
or
private corporation A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
. Shareholders may be referred to as members of a corporation. A person or legal entity becomes a shareholder in a corporation when their name and other details are entered in the corporation's register of shareholders or members, and unless required by law the corporation is not required or permitted to enquire as to the beneficial ownership of the shares. A corporation generally cannot own shares of itself. The influence of a shareholder on the business is determined by the shareholding percentage owned. Shareholders of a corporation are legally separate from the corporation itself. They are generally not liable for the corporation's debts, and the shareholders' liability for company debts is said to be limited to the unpaid share price unless a shareholder has offered guarantees. 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 is on the record as owners of a shareholding, the first one on the record is taken to control the shareholding, and all correspondence and communication by the company will be with that person. Shareholders may have acquired their shares in the
primary market :''"Primary market" may also refer to Art valuation#Primary and secondary markets, a market in art valuation.'' The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the i ...
by subscribing to the IPOs and thus provided
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capitals, List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the dura ...
to the corporation. However, most shareholders acquire shares in the
secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial markets, financial market in which previously issued financial instruments such as stock, Bond (finance), bonds, option (finance), options, and Fut ...
and provided no capital directly to the corporation. Shareholders may be granted special privileges depending on a share class. The
board of directors A board of directors (commonly referred simply as the board) is an Committee#Executive committee, executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such a ...
of a corporation generally governs a corporation for the benefit of shareholders. Shareholders are considered by some to be a
subset In mathematics, Set (mathematics), set ''A'' is a subset of a set ''B'' if all Element (mathematics), elements of ''A'' are also elements of ''B''; ''B'' is then a superset of ''A''. It is possible for ''A'' and ''B'' to be equal; if they are ...
of stakeholders, which may include anyone who has a direct or indirect interest in the
business entity In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, lawsuit, sue and be sued, ownership, own property, and so o ...
. For example,
employees Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a co ...
,
suppliers In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, activ ...
,
customers In sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes ...
, the
community A community is a social unit (a group of living things) with commonality such as place, norms, religion Religion is usually defined as a social- cultural system of designated behaviors and practices, morals, beliefs, worldviews, text ...
, etc., are typically considered stakeholders because they contribute value or are impacted by the
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...
.


Types

A beneficial shareholder is the person or legal entity that has the economic benefit of ownership of the shares, while a nominee shareholder is the person or entity that is on the corporation's register of members as the owner while being in reality that person acts for the benefit or at the direction of the beneficial owner, whether disclosed or not. Primarily, there are two types of shareholders.


Ordinary shareholders

An individual or legal entity that owns
ordinary share Common stock is a form of corporate equity (finance), equity ownership, a type of security (finance), security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or or ...
s of a company (in the United States commonly referred as common stock) is usually referred to as an ordinary shareholder. This type of shareholding is the most common. Ordinary shareholders have the right to influence decisions concerning the company by participating at general meetings of the company and in the election of directors and can file class action lawsuits, when warranted.


Preference shareholders

Preference shareholders are owners of
preference share Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt inst ...
s (in the United States commonly referred as preferred stock). They are paid a fixed rate of dividend, which is paid in priority to the dividend to be paid to the ordinary shareholders. Preference shareholders usually do not have voting rights in the company.


Rights

Subject to the applicable laws, the rules of the corporation and any
shareholders' agreement A shareholders' agreement (sometimes referred to in the United States, U.S. as a stockholders' agreement) (SHA) is an agreement amongst the shareholders or members of a company. In practical effect, it is analogous to a partnership agreement. It ca ...
, 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 resolution With respect to public companies in the United States, a shareholder resolution is a proposal submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insis ...
s. * To vote on mergers and changes to the corporate charter. * To
dividend A dividend is a distribution of Profit (accounting), profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed ...
s 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 vote on & file
shareholder resolution With respect to public companies in the United States, a shareholder resolution is a proposal submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insis ...
s. * To vote on management proposals. * To what
asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...
s remain after a
liquidation Liquidation is the process in accounting by which a company (law), company is brought to an end in Canada, United Kingdom, United States, Republic of Ireland, Ireland, Australia, New Zealand, Italy, and many other countries. The assets and p ...
. The above-mentioned rights can be generally classified into (1) cash-flow rights and (2) voting rights. While the value of shares is mainly driven by the cash-flow rights that they carry (" cash is king"), voting rights can also be valuable. The value of shareholders' cash-flow rights can be computed by discounting future free cash flows. The value of shareholders' voting rights can be computed by four methods: * The difference between voting shares and non-voting shares (dual-class approach). * The difference between the price paid in a block-trade transaction and the subsequent price paid in a smaller transaction on exchanges (block-trade approach). * The implied voting value obtained from option prices. * The excess lending fee over voting events.


See also

* Beneficial ownership * Business valuation *
Class action A class action, also known as a class-action lawsuit, class suit, or representative action, is a type of lawsuit where one of the parties is a group of people who are represented collectively by a member or members of that group. The class action ...
* Class A share *
Class B share In finance, a Class B share or Class C share is a designation for a share class of a common stock, common or preferred stock that typically has strengthened voting rights or other entitlement, benefits compared to a Class A share that may have bee ...
*
Corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting Accounting, also known as accountancy, is the measuremen ...
*
Employee stock ownership Employee stock ownership, or employee share ownership, is where a company's employees own shares in that company (or in the parent company of a group of companies). US employees typically acquire shares through a share option plan. In the UK, Emp ...
*
Investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some specie ...
* Real party in interest *
Shareholder value Shareholder value is a business term, sometimes phrased as shareholder value maximization. It became prominent during the 1980s and 1990s along with the management principle value-based management or "managing for value". Definition The term "shar ...
*
Social ownership Social ownership is the appropriation of the surplus product, produced by the means of production, or the wealth that comes from it, to society as a whole. It is the defining characteristic of a socialist economic system. It can take the for ...
* Street name securities


References

{{authority control Business terms Stock market