Who is a Shareholder: A shareholder is a person, industry, company, firm or any stockholder that holds at least a single share of an institution stock or a conglomerate. Public and private companies have ownership of these shares listed in the market. The shareholder may also be referred to as a legal member of that institution.
As per law, for becoming a shareholder, a person needs to submit the name and other details in the register of that company. For determining the influence of a shareholder in a business and its decision making processes, the percentage of shares in his/her kitty matter a lot.
Shareholders and Their Significance
Corporations and shareholder of a corporation are poles apart due to distinguishing legal patchwork that causes distinction. Hence, shareholders hold no liability towards the company’s debt policy or else they have a limit (unpaid share price). However, it alters once the stockholder volunteers the guarantee.
Besides, the corporation has to record the owner on the register. It does not need to do that for the beneficial ownership of the shareholding. If more than one individual is present as the shareholding’s owner, then, in that case, the first person has the power to manoeuvre the control of a shareholding. So, for any purpose, the contact and correspondence will happen with that individual. The company would communicate him/her for any piece of information.
Formal Knowledge About Shareholders
When a single shareholder gets hold of more than 50 per cent shares of a company is the majority shareholder. On the other hand, the one who has less than fifty per cent of the institution’s stock is in the category of minority stockholders.
The majority shareholder has the ownership of the company in general. Mostly, the founding members or a member has that many shares. The veteran companies have progeny as the prime stockholders.
By wielding the maximum power, such shareholders influence decision making of a company majorly. It includes replacing any of the board members, like CEO (chief executive officers) of the company and other senior staffs. However, this does not apply to corporate shareholders. In case of insolvency, their property will not come under any seizure, and creditors cannot claim any stake over them.
Subset of Stakeholders
Some people consider shareholders as a mere subset of stakeholders; it is inclusive of any indirect or direct relation with a business entity. In that case, customers, suppliers, workers, etc. who have a contribution to the growth of a company are typically the stakeholders. Their efforts count in growing the market of a conglomerate.
Generally, there are two types of shareholders: Nominee and Beneficial.
Nominee: It is that individual who has the name registered in the corporation’s register an owner. However, he/she is, in fact, are there to fetch some benefit on the nomination of the actual beneficiary.
Beneficial: The shareholder bargains the economic benefit while owing the shares.
Classification of Shareholders
Preferred Shareholders: These type of shareholders enjoy a fixed amount of dividend based on preference prior to the common shareholder. However, their voting rights are withheld.
Common Shareholders: Anyone who has the common shares of a company is the common shareholder. It is the most prevalent kinds of shareholding. They hold the power of influencing decisions. Moreover, they can take legal action against any malfunction if witnessed in the company.
Rights of a Shareholder
It’s a subject matter of laws applicable to stock exchanges and tradings in the market. As per the rules and agreements, shareholders may have the following rights:
- Can purchase new shares after the issuance.
- It can sue the company on violating trust.
- Shareholders may have the right to vote on management proposals.
- They have a right over dividends.
- They can bring a change in the corporate charter.
- May have the right to vote on mergers.
- They can offer a proposal for the resolution of shareholders.
- There’s a power to appoint directors.
- They have the right to participate in annual meetings of the company through video conferencing or calls.
- Shareholders can summon inspection into the record books of the company.
The cash-flow rights of shareholders can find the reckoning in the following ways. Here are the fours ways for computing the rights of voting for a shareholder.
- By classifying the total number of non-voting and voting shares.
- The voting value garnered from option prices.
- Application of the block trade approach can help satiate the issue.
- The lending fee offered in excess for the voting events.