A shareholder is a person, or a company that holds a part-ownership of a business by buying shares in the market for stocks. Dividends are paid out to shareholders when the company grows its stock price and financial profits. Shareholders aren’t personally responsible for the debts and obligations of the business, but they are responsible for the risk when they invest their money in it.
Shareholders can be divided into two broad categories: those who hold common shares and those holding preferred shares. It is also possible for businesses to further break them down on a class basis, with different rights being tied to different types of shares.
Common shares are usually given to employees as a portion of their compensation and the holders enjoy voting rights on matters that affect the business and also receiving dividends derived from the company’s profits. When it comes to the rights of assets in a company liquidation, they fall behind the preference shareholders.
Preferred shareholders, on the other hand do not have the right to take part in the management decisions of the company. They also do not have a fixed dividend, and the rate can change depending on the profit situation of the business in any given year. They are also paid before the common share is distributed in the event of the event of liquidation. It is also possible for shareholders to enjoy a number of other rights, such as the right to receive a preference dividend or a special dividend, or no dividend at all.