Shareholders are either individuals or corporations who invest their money in a company by purchasing shares of stock. They make a profit or loss on their investment depending on the performance of the company as well as its ability to pay dividends. They also gain from capital appreciation when the value of their shares increases over time. Shareholders’ rights and privileges may differ in accordance with state law, a company charter or bylaws.
In general, there are two types of shareholders that are common stockholders (common stock) and preferred share owners. Common shareholders are massive in number and have voting rights at shareholder meetings. They can participate in the decision-making process and scrutinize reports. Preferred shareholders can receive preferential dividends and enjoy priority over ordinary shares in liquidation but only after creditors have been paid.
The term “shareholder” can also refer to a person who holds debentures or bonds issued by the company, which are debt instruments that grant the investor the right to a specified rate of return on their investment. They aren’t typically active in the day-to-day operations of the business, however they are able to participate in the company’s decisions if their interests are represented in the company’s management body.
Strategic shareholders are investors who buy shares in a company to achieve an objective of strategic importance, such as acquiring new markets or technologies. This type of shareholder is an essential component of a family company, as they understand the scope of the project and its possibilities, and are willing to take a risk to gain a return on their investment.
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