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A shareholder (in the United States often referred to as stockholder) of a
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
is an
individual An individual is that which exists as a distinct entity An entity is something that exists as itself, as a subject or as an object, actually or potentially, concretely or abstractly, physically or not. It need not be of material existence. In ...
or
legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by ...
(such as another
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
, a
body politic The body politic is a medieval In the history of Europe The history of Europe concerns itself with the discovery and collection, the study, organization and presentation and the interpretation of past events and affairs of the people ...

body politic
, a trust or
partnership A partnership is an arrangement where parties, known as business partner A business partner is a commercial entity with which another commercial entity has some form of Business alliance, alliance. This relationship may be a contractual, exclus ...

partnership
) that is registered by the corporation as the legal owner of
shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known ...
of the
share capital __NOTOC__ A corporation's share capitalGlossary on Trade Financing Terms - S
in the U ...
of a
public In public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth Engli ...
or
private corporation A privately held company, private company, or close corporation is a corporation not owned by the government, non-governmental organization File:Europe in a suitcase - UK.jpg, upright=1.3, alt=A roomful of people, Europe-Georgia Institute head ...
. Shareholders may be referred to as members of a corporation. A person or legal entity becomes a shareholder in a corporation when their name and other details are entered in the corporation's register of shareholders or members, and unless required by law the corporation is not required or permitted to enquire as to the
beneficial ownership Beneficial ownership is a term in domestic and international commercial law which refers to the natural person or persons "who ultimately own or control a legal entity or arrangement, such as a company, a trust, or a foundation". The legal owner (i ...
of the shares. A corporation generally cannot own shares of itself. The influence of a shareholder on the business is determined by the shareholding percentage owned. Shareholders of a corporation are legally separate from the corporation itself. They are generally not liable for the corporation's debts, and the shareholders' liability for company debts is said to be limited to the unpaid share price unless a shareholder has offered guarantees. The corporation is not required to record the beneficial ownership of a shareholding, only the owner as recorded on the register. When more than one person is on the record as owners of a shareholding, the first one on the record is taken to control the shareholding, and all correspondence and communication by the company will be with that person. Shareholders may have acquired their shares in the
primary market :''"Primary market" may also refer to a market in art valuation.'' The primary market is the part of the capital market 200px, The trading floor of the New York Stock Exchange, one of the largest secondary capital markets in the world. Most of ...
by subscribing to the
IPO An initial public offering (IPO) or stock launch is a public offering A public offering is the offering of securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument Finance is the ...
s and thus provided
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
to the corporation. However, most shareholders acquire shares in the
secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial market A financial market is a market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public ...
and provided no capital directly to the corporation. Shareholders may be granted special privileges depending on a
share classIn finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available w ...
. The
board of directors A board of directors is a group of people who jointly supervise the activities of an organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, W ...
of a corporation generally governs a corporation for the benefit of shareholders. Shareholders are considered by some to be a
subset In mathematics Mathematics (from Ancient Greek, Greek: ) includes the study of such topics as quantity (number theory), mathematical structure, structure (algebra), space (geometry), and calculus, change (mathematical analysis, analysis). ...

subset
of
stakeholders Stakeholder may refer to: *Stakeholder (corporate), a group, corporate, organization, member, or system that affects or can be affected by an organization's actions *Project stakeholder, a person, group, or organization with an interest in a projec ...
, which may include anyone who has a direct or indirect interest in the
business entity In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, lawsuit, sue and be sued, ownership, own property, and so on ...
. For example,
employees Employment is a relationship between two parties, usually based on contract A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement. A contract is le ...

employees
,
suppliers In commerce, a supply chain is a system of organizations, people, activities, information, and resources involved in supplying a product (business), product or service (business), service to a consumer. Supply chain activities involve the transfor ...
,
customers In sales, commerce, and economics, a customer (sometimes known as a :wikt:client, client, buyer, or purchasing, purchaser) is the recipient of a Good (economics), good, service (economics), service, product (business), product or an Intellectua ...

customers
, the
community A community is a social unit The term "level of analysis" is used in the social sciences to point to the location, size, or scale of a research target. "Level of analysis" is distinct from the term "unit of observation" in that the former refer ...

community
, etc., are typically considered
stakeholders Stakeholder may refer to: *Stakeholder (corporate), a group, corporate, organization, member, or system that affects or can be affected by an organization's actions *Project stakeholder, a person, group, or organization with an interest in a projec ...
because they contribute value or are impacted by the
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
.


Types

A beneficial shareholder is the person or legal entity that has the economic benefit of ownership of the shares, while a
nominee A candidate, or nominee, is the prospective recipient of an award or honor, or a person seeking or being considered for some kind of position; for example: * to be election, elected to an official, office — in this case a Preselection, candidate ...
shareholder is the person or entity that is on the corporation's register of members as the owner while being in reality that person acts for the benefit or at the direction of the beneficial owner, whether disclosed or not. Primarily, there are two types of shareholders.


Ordinary shareholders

An individual or legal entity that owns ordinary shares of a company (in the United States commonly referred as common stock) is usually referred to as an ordinary shareholder. This type of shareholding is the most common. Ordinary shareholders have the right to influence decisions concerning the company by participating at general meetings of the company and in the election of directors and can file class action lawsuits, when warranted.


Preference shareholders

Preference shareholders are owners of
preference share Preferred stock (also called preferred shares, preference shares or simply preferreds) is a component of share capital which may have any combination of features not possessed by common stock including properties of both an equity and a debt instru ...
s (in the United States commonly referred as preferred stock). They are paid a fixed rate of dividend, which is paid in priority to the dividend to be paid to the ordinary shareholders. Preference shareholders usually do not have voting rights in the company.


Rights

Subject to the applicable laws, the rules of the corporation and any
shareholders' agreement A shareholders' agreement (sometimes referred to in the U.S. as a stockholders' agreement) (SHA) is an agreement amongst the shareholder A shareholder (also known as stockholder) is an individual or institution (including a corporation) that legal ...
, shareholders may have the right: * To sell their shares. * To vote on the directors nominated by the board of directors. * To nominate directors (although this is very difficult in practice because of minority protections) and propose
shareholder resolution With respect to public companies in the United States, a shareholder resolution is a proposal submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insist ...
s. * To vote on mergers and changes to the corporate charter. * To
dividend A dividend is a distribution of profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit ...

dividend
s if they are declared. * To access certain information; for publicly traded companies, this information is normally publicly available. * To sue the company for violation of fiduciary duty. * To purchase new shares issued by the company. * To vote on & file
shareholder resolution With respect to public companies in the United States, a shareholder resolution is a proposal submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insist ...
s. * To vote on management proposals. * To what
asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such a ...
s remain after a
liquidation Liquidation is the process in accounting by which a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture o ...
. The above-mentioned rights can be generally classified into (1) cash-flow rights and (2) voting rights. While the value of shares is mainly driven by the cash-flow rights that they carry (" cash is king"), voting rights can also be valuable. The value of shareholders' cash-flow rights can be computed by discounting future free cash flows. The value of shareholders' voting rights can be computed by four methods: * The difference between voting shares and non-voting shares (dual-class approach). * The difference between the price paid in a block-trade transaction and the subsequent price paid in a smaller transaction on exchanges (block-trade approach). * The implied voting value obtained from option prices. * The excess lending fee over voting events.


See also

*
Beneficial ownership Beneficial ownership is a term in domestic and international commercial law which refers to the natural person or persons "who ultimately own or control a legal entity or arrangement, such as a company, a trust, or a foundation". The legal owner (i ...
*
Business valuation Business valuation is a process and a set of procedures used to estimate the economic value In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), product ...

Business valuation
*
Class action A class action, also known as a class-action lawsuit, class suit, or representative action, is a type of lawsuit A lawsuit is a proceeding by a party or parties against another in the civil Civil may refer to: *Civic virtue, or civility ...
*
Class A share In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available ...
*
Class B shareIn finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available w ...
*
Corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation A corporation is an organization—usually a group of people or a company—authorized by the St ...
*
Employee stock ownership Employee stock ownership, or employee share ownership, is where a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a m ...
*
Investor An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...
*
Real party in interest In law, the real party in interest is the one who actually possesses the substantive right being asserted and has a legal right to enforce the claim (under applicable substantive law). Additionally, the "real party in interest" must sue in his own ...
*
Shareholder value Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders. It became pr ...
*
Social ownership Social ownership is the appropriation of the surplus product Surplus product (german: Mehrprodukt, links=no) is an economic concept explicitly theorised by Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philoso ...
*
Street name securities The phrase street name securities or "nominee name securities" is used in the United States to refer to Security (finance), securities of companies which are held electronically in the account of a brokerage firm, stockbroker or bank or custodian, ...


References

{{authority control Business terms Stock market