- Advertisement -
Home Business What Are the Different Types of Shareholders?

What Are the Different Types of Shareholders?

- Advertisement -

A shareholder is a person or an institution owning shares of one or more company’s stock. However, not all shareholders are the same. The role of shareholders allows them to vote on key decisions in a corporate and enjoy dividends as the company earns profits. On the other hand, some shareholders are passive investors receiving a fixed ROI every year.

If a company is selling the assets or is getting liquidated, the shareholder receives one portion of the money. It is after the settlement of the creditors. If such a situation arises, a stockholder enjoys the advantage. A shareholder need not bear or be a part of managing financial obligations and debts that are incurred by the company. They have to shoulder none of the company burdens. Thus, they are safe as even the creditors cannot ask or force the shareholders to pay them.

Related Post: How to Become a Shareholder in a Company

Types of Shareholders

Types of Shareholders

There are two types of shareholders, the Common and the Preferred type of shareholders.

Common shareholders are the shareholders owning common stock in a company. They are the stockholders of the prevalent type, and they can vote on matters relating to the company. These shareholders have control over the managing style of the company. They can also file a lawsuit against the company’s actions if they find anything wrong that is harmful potentially for the organization.

Preferred shareholders are not the same as common shareholders. They share the preferred stock of the company. They have no say or voting rights in the company. They do not have any say or voting rights in the company. Instead, they earn a fixed amount from the company as a shareholder. It is the annual dividend as a fixed amount. They receive this amount even before the common shareholders receive payment.

However, the common stock and the preferred stock see a positive performance and value increase of the company. Yet, the common stock shareholders are the ones that enjoy higher capital gains, but they also have to bear the burn of losses, if any.

Also Read: How to Choose the Right Startup Incubator

Role of Shareholders

Role of Shareholders

A shareholder is not only revolving around receiving profits. It entails other responsibilities, such as:

  • Deciding and brainstorming the powers that they will give the directors of the company. It includes removing and appointing them.
  • Deciding on the salary of the directors. It is a tricky practice as the stockholders must assure the amount compensates for the cost of living and expenses in the city, regardless of where he lives in the city.

The shareholders are the company owners, and they give financial backing over a lifetime and receive potential dividends. A corporation or a person can become in three ways a shareholder of a company.

  • By investing in new shares in the company.
  • By subscribing to the company memorandum during incorporation.
  • By obtaining shares by purchase from existing shareholders, by will, or by gift.

Subscribers are the people who usually initiate company incorporation, and they automatically after incorporation become the shareholders as the first point.

The shareholders can transfer their shares, but private companies can restrict this process through the articles of the company.

Also Read: Shareholders vs directors: who are they?  

A shareholder can become a director as he is already a part-owner of the company. Thus, he has the privilege of exercising control and receiving profits over company management.  On the other hand, a director is a person to perform the responsibilities assigned. He is hired by the shareholders and is given to handle the daily operations in the company aiming to improve the status of the company operations.

Shareholders cannot make amendment decisions made by directors regarding the running of the company. However, the role of shareholders allows them to get a director out of the company, or the board, and to restrict the powers of a director.

- Advertisement -
- Advertisement -

Stay Connected

16,985FansLike
1,850FollowersFollow
2,458FollowersFollow

Must Read

How An Accountancy Firm Can Benefit Your Business Finances

At the early stages of a business, running it as a one-man-show may not be difficult. You might play all the roles involved, such...
- Advertisement -

Bitcoin – Top 4 Great Advantages that Users Get!

The world is developing rapidly with lots of emerging technologies. These particular technologies made the lives of people very easy than before. People can...

Bitcoin wallet- Store your bitcoins in digital wallets!

Bitcoin is a digital currency, and when we discuss technically, these coins are made up of 1s and 0s. These coins are stored in...

Working on Bitcoin explained in detail!

You must have seen that digital currencies are getting popular these days. The most trending cryptocurrency is bitcoin, which is gaining more and more...

Recent Published Startup Stories

The Fastest Growing Eyewear Start-up

When looking for online spectacles, you can come across a plethora of brands that retail glasses and sunglasses. However, you can not find one...

InfoClutch: Providing Success-Driving B2B Marketing Data Solutions Across the Globe

InfoClutch is a B2B data marketing company based in Edison, New Jersey, that fulfills its clients’ tailored data and information research, analytic, and communication...

Price2Spy’s Path To Success In A Dynamic E-commerce Environment

Decades ago, sellers used to manually strive the idea of their competitors each striking point so that they could come up with something more...

Outfunnel: The Revenue Marketing Automation Tool For Smbs

Marketing automation drives a 14.5% increase in sales productivity and a 12.2% reduction in marketing overhead; Mind-Boggling, isn’t it? Well, what if we tell...

The List of Best Top 10 Startup Incubators and Accelerators Worldwide

The number of startups in the world are increasing. They are successful with the backing of the best incubators in the world. The incubators...
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Select Language »