shareholder

Reviewed by Vishnava | Updated on Sep 23, 2021

Catalogue

Meaning of Shareholder

  • It is a person, company or institution that owns a share or shares of a company.
  • In effect, shareholders are owners of the company and they reap the benefits of the company’s success in the form of increased stock valuations and dividends. Conversely, if the company is undergoing a loss, then the shareholder’s portfolio also suffers.
  • The liability of the shareholders is not personal liability and if the company were to become insolvent, then the shareholder’s personal assets cannot be attached.

Types of Shareholders

  • Majority shareholder: a single shareholder who owns and controls more than 50% of the company’s outstanding shares. More often than not, the founders of the company constitute majority shareholders.
  • Minority shareholder: a shareholder who controls less than 50% of the company’s outstanding shares.

Roles and Responsibilities of the Shareholder

  • Taking a decision of the salaries of the directors.
  • Deciding the powers that will be bestowed upon the company’s directors.
  • Taking decisions on the changes in the company’s constitution.
  • Keeping a check on the financial statements of the company.

Rights of the Shareholder

  • The right to inspect the books and records of the company.
  • The right to vote on corporate matters such as naming board of directors.
  • The right to vote via proxy, mail-in ballots or online voting platforms.
  • The right to receive dividends from the company’s profits.
  • The right to claim proportionate allocation of proceeds if the company undergoes liquidation.
  • The power to sue the corporation for misdeeds of its directors and its officers.

Difference Between Shareholder and Director

Shareholder is a part owner of the company whereas a director is a person who is hired by the company to conduct the daily operations of the company.

Difference Between Shareholder and Stakeholder

A shareholder is an owner of the company based on his shareholding. A stakeholder, on the other hand, need not necessarily own a part of the company, but does have an interest in its performance. This interest may be monetary or not.

Difference Between A Shareholder and A Subscriber

An organised group of people who form and run the company prior to it going public refers to the subscribers of the company. They are the first members whose names are listed on the Memorandum of Association (MOA). Shareholders come into the picture after the company goes public and they purchase the shares of the company.

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