Shareholders are the people who hold shares in a company, and get benefits from the company’s success. Investors can invest in various ways as a shareholder, whether it’s a private or public business.
A shareholder may also sell their shares to investors, which allows them to make a profit on their investment. Capital gains are a result of a company’s increasing profits. Shareholders may be legal entities or individuals, and they may also be part of a company.
There are several kinds of shareholders in a company and the type they are based on determines their rights and privileges. Certain shares are eligible for voting rights but others don’t. In addition, certain kinds of shares enjoy a certain preference over other classes in dividend payouts. These rights are stipulated in the bylaws or charter of the company, as well as the laws of the state.
The main categories of shareholders are common, preferred, and institutional. Common shareholders are people who hold the common stock of a corporation. They have the right to vote and have the ability to influence corporate decisions and types of shareholders in a business issues. They also get dividend payments in proportion to the earnings of the company. Preferred shareholders, on the other hand, have priority over common shareholders with respect to dividend distribution and also have more rights to assets in the case of liquidation. Institutional shareholders are large companies like hedge funds, pension funds and mutual funds that hold significant shares in a business.