A shareholder is someone or a business that has part ownership in a company, by buying shares on the stock exchange. Dividends are paid to shareholders whenever the company improves its stock price and financial profits. Shareholders don’t have to take on the responsibility of the company’s debts or liabilities. the company, however they are taking on an investment risk when they invest.
Shareholders can be divided into two broad categories: those who own common shares as well as those who hold preferred shares. Companies can also break them down further into class and have different rights for each class of shares.
Common shares are typically given to employees as a percentage of their salary with the holders gaining voting rights on issues that affect the business and also receiving dividends from the company’s profit. When it comes to the right of assets in a business liquidation, they rank behind the preference shareholders.
Preferred shareholders aren’t allowed to participate in management decisions. The dividend rate is not fixed and can change based on the financial health of the company during any given year. They are also paid before the common share in the event of a company’s liquidation. Shareholders also be granted other rights, for instance, the right to receive a preferential or special dividend, or no dividend.