Shareholders are people or companies who invest money in a company by buying shares of stock. They make a profit or loss on their investment based on the performance of the company as well as its ability to pay dividends. They also benefit from the possibility of capital appreciation. This happens when the value of the shares increases over time. Shareholder rights and privileges may differ according to state law and a company’s charter, or bylaws.
In general, there are two types of shareholders common stockholders (common stock) and preferred share owners. Common shareholders are large in number and are entitled to vote at shareholder meetings. They can be part of the decision-making process and check the reports. Preferred shareholders can receive preferential dividends and have priority over ordinary shares in liquidation.
The term “shareholder” could be used to refer to someone who owns bonds or debentures issued by the company, which are debt instruments which give the investor the right to a specified rate of return on their investments. They are typically not involved in the daily operations of the company, however their interests could be represented in the governance body.
Investors who purchase shares in the company with a goal in mind, for instance the acquisition of new markets or the development of technology, are known as strategic shareholders. This kind of shareholder is a crucial part of a family business because they are aware of the project’s scope and appreciate its potential and are willing to take on risk to gain a return on their investment.
