The Types of Shareholders in a Business

A shareholder is an individual or a corporation who holds an interest in a company by purchasing shares on the stock exchange. The shareholders receive rewards when the business succeeds in enhancing its stock valuation and financial returns through dividends. Shareholders are not personally accountable http://companylisting.info/ for the debts and liabilities of the company, however they are liable when they invest their money into it.

The types of shareholders in a business can be bifurcated into two broad categories namely those who hold common shares and those who have preferred shares. Businesses can break them down further into class with different rights that are associated with each class shares.

Employees are often awarded common shares as a part of their compensation. They enjoy voting rights over business issues and are paid dividends from the profits of the company. They are the second-highest priority shareholders when it comes to the right to assets in liquidation of the company.

The preferred shareholders are not able to take part in management decisions. They also do not get a fixed dividend, and the amount will fluctuate in accordance with the performance of the business in any given year. They are also paid prior to the common share is distributed in the event of the event of a company’s liquidation. It is also possible for shareholders to be granted a number of other rights, including the right to receive a preference dividend, a special dividend or no dividend at all.