Types of Shareholders in a Business

Shareholders are people who own shares in a company, and get benefits from the company’s performance. A person can invest in various ways as a shareholder whether it’s a public or private business.

A shareholder may also sell their shares to investors, and this allows investors to earn a return on their investment. Capital gains are a result of an organization’s growing profits. Shareholders can be legal entities or individuals and they may also be members of a corporation.

There are different types of shareholders, and their rights and privileges depend on the type. Certain shares are entitled to vote however, others do not. In addition, certain types of shares have a preference over other classes of dividend payments. These rights are specified in the bylaws or charter of the company, as well as the laws of the state.

The main categories of shareholders are preferred, common, and institutional. Common shareholders are those who own the company’s common stock and have the right to vote on corporate issues and business decisions. They also receive dividends that are based on the profits of a company. Preferred shareholders have priority over ordinary shareholders in dividend distribution. They also have a greater claim on assets in the event that a company is liquidated. Institutional shareholders are large organizations such as pension funds, mutual funds and hedge funds that hold a significant amount of shares in the company.

Leave a Reply

Your email address will not be published.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