A shareholder is someone or a company that holds a part ownership in a business by purchasing shares on the stock exchange. The shareholders receive rewards when the business succeeds in gaining stock value and financial profits through dividends. Shareholders do not need to personally bear the obligations or debts of the company, however they are taking the risk of investing.
The kinds of shareholders in an organization can be split into two broad categories: the ones who own common shares and those who hold preferred shares. It is also possible for businesses to further break them down by class, with different rights being associated with the various classes of shares.
Common shares are usually given to employees as a percentage of their pay with the holders gaining voting rights in matters which affect the business as well as also receiving dividends from the company’s profit. When it comes to the rights of assets in a liquidation, they fall behind preference shareholders.
Preferred shareholders, on the other hand do not have the right to participate in management decisions of the company. They also do not get an annual fixed dividend rate and the rate can change in accordance types of shareholders in a business with the performance of the company during any particular year. Additionally they are paid prior the common shares are paid out in the event of a liquidation of the company. It is possible for shareholders to be granted various other rights, like the right to a preferred dividend or a special dividend, or no dividend at all.