Types of Shareholders in a Business

Shareholders are the individuals or organizations who invest funds in a business by purchasing shares of stock. The performance of the company and its additional resources ability to pay dividends, determines whether they earn profits or lose money. They also profit from the potential for capital appreciation, which is when the value of the shares increase over time. Shareholders’ rights and privileges are varying according to state law, a company charter or bylaws.

In general, there are two types of shareholders common stockholders (common stock) and preferred share owners. The majority of shareholders are common stockholders and they have voting rights during shareholder meetings. They can check reports and participate in decision-making. They can also receive preferred dividends and have precedence over ordinary shares during liquidation.

The term “shareholder” could also be used to refer to a person who holds debentures or bonds issued by the company, which are debt instruments that grant investors the right to receive a certain rate of return on their investment. These investors aren’t usually involved in the day-today operations of the company, but they can have a say in the decisions made when their interests are reflected in the company’s governance body.

Investors who purchase shares in a company with a strategic goal in mind, like the acquisition of new markets or the development of technology, are known as strategic shareholders. This kind of shareholder plays a vital role in a family-owned company, since they can comprehend the scope of the project and its potential and are capable of taking risks to ensure the benefit of their investment.