The Types of Shareholders in a Business

A shareholder is anyone or a business that has an interest in a company through the purchase of shares on the stock exchange. Dividends are paid to shareholders when the company grows its stock value and financial profits. Shareholders are not personally liable for the liabilities and debts of the company, but they do have to take on risk when they invest their money in it.

The types of shareholders that are part of a company can be classified into two broad categories namely those who have common shares and those who own preferred shares. It is also possible for companies to further divide these shares on a class basis, with different rights attached to the various types of shares.

Common shares are often given to employees as a part of their pay with the holders gaining the right to vote on issues which affect the business as well as also receiving dividends from the company’s profits. When it comes to the right of assets in a business liquidation, they fall behind preferred shareholders.

Preferred shareholders, on the other hand, are not entitled to participate in management decisions of the company. They also do not get an annual fixed dividend rate and the rate will change according to the profitability of the business during any particular year. They are also paid prior the common share is dissolved in the event of liquidation. Shareholders can have other rights like the right to receive a preferred or special dividend, or even no dividend.

Tags: No tags

Leave A Comment

Your email address will not be published. Required fields are marked *