Shareholder

A shareholder is a person or a legal entity that owns shares in a corporation. In the United States, these owners are often called stockholders. A legal entity might be another corporation, a trust, or a partnership. Both private corporations and public companies have shareholders. These individuals or groups are the legal owners of the company's share capital. They are also sometimes referred to as members of the corporation.

To become a shareholder, a person must acquire shares. Their name and details are then entered into the corporation's register of shareholders. This register serves as the official record of ownership. The corporation is generally not allowed to own its own shares. It is also not required to look into who the beneficial owner is. The company only needs to record the owner listed on the register. If multiple people are listed for one shareholding, the first person on the record is considered the controller.

Shareholders are legally separate from the corporation they own. This separation provides a concept known as limited liability. Shareholders are generally not responsible for the debts of the corporation. Their liability is usually limited to the amount of the unpaid share price. This protects their personal assets if the company fails. However, a shareholder might become liable if they have offered specific guarantees. A board of directors usually governs the company to act in the interest of these shareholders.

There are different ways people acquire these shares. Some people buy shares in the primary market. They do this by subscribing to Initial Public Offerings, or IPOs. This process provides capital directly to the corporation. However, most shareholders buy shares in the secondary market. In the secondary market, they do not provide capital directly to the company. Shareholders can hold different classes of shares. These classes grant different privileges to the owners.

Two main types of shareholders are ordinary and preference shareholders. Ordinary shareholders, or common stock owners in the U.S., are the most common. They can influence company decisions by voting at general meetings. They can also elect directors or file class action lawsuits. Preference shareholders hold preference shares, also called preferred stock in the U.S. They receive a fixed rate of dividends. These payments are made in priority to the dividends given to ordinary shareholders. Most preference shareholders do not have voting rights.

Ownership can also be split between beneficial and nominee shareholders. A beneficial shareholder is the person who receives the economic benefit of the shares. A nominee shareholder is the person listed on the official register. The nominee acts on behalf of the beneficial owner. In many places, this relationship is managed by trust law. This makes the nominee's role simple and passive. However, in some Asian jurisdictions like China, this is governed by contract law. This can be very complex and risky for the nominee.

Shareholders possess various specific rights depending on the law and company rules. These rights are often divided into cash-flow rights and voting rights. Cash-flow rights allow shareholders to receive dividends or a share of assets during liquidation. Voting rights allow them to participate in major decisions. Shareholders can vote on mergers or changes to the corporate charter. They can also vote on management compensation and proposals. They may even have the right to nominate directors or propose resolutions.

Finally, it is important to distinguish shareholders from stakeholders. Some writers consider shareholders to be a subset of the larger stakeholder group. A stakeholder is anyone with a direct or indirect interest in a business. This includes employees, suppliers, customers, and the local community. These groups are stakeholders because they contribute value or are impacted by the company. While shareholders own a piece of the company, stakeholders represent the wider circle of people connected to its success.