The Types of Shareholders in a Business

A shareholder is anyone or a business that has an interest in a company by purchasing shares on the stock exchange. Shareholders are rewarded when the business succeeds in boosting its stock value and financial returns through dividends. Shareholders don’t have to be personally responsible for the debts or liabilities of the company, but they take an element of risk when they invest.

The kinds of shareholders in an organization can be split into two broad categories, those who hold common shares as well as those who own preferred shares. Businesses can break them down further by class and have different rights associated with each class of shares.

Common shares are typically given to employees as part of their remuneration and the holders enjoy voting rights in matters that affect the business, and also receiving dividends from the company’s earnings. They rank after preference shareholders in terms of the rights to assets in the event of a liquidation of the business.

Preferred shareholders, on the other hand, are not entitled to take part in the management decisions of the company. The dividend rate is not set and will fluctuate based on the financial performance of the company during any given year. They are also paid prior the common share is dissolved in the event of a company’s liquidation. It is possible for shareholders to enjoy a number of other rights, like the right to receive a preference dividend, a special dividend or no dividend at all.

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