Stockholder

Stockholder

Stockholders are the ones who actually own a company. They are vested in its success and will are looking for ways to increase the value of their shares. They have significant influence on the company and thus it is important to always stand up for and protect their rights. 

There are many different types of stockholders, and each has his own responsibilities. So,  you must be aware of both in order to manage your company ethically and to safeguard the interests of your stockholders. 

Here, we look at the roles and responsibilities of stockholders and how they are expected to be actively involved in the company. 

What is a stockholder?

An individual or group that owns stock in a company is known as a shareholder. The number of a company’s stockholders can vary widely, from just a few to tens of thousands.  

In most jurisdictions, stockholders also have the right to bring a derivative suit on behalf of the company. This allows them to sue individuals or entities that have harmed the company, even if they are not directly involved in the wrongdoing. For example, if a defective product harms a company, the stockholders may be able to sue the manufacturer of the product. 

Publicly traded companies typically have the most stockholders, while privately held companies tend to have fewer.  

Stockholders typically purchase their shares through an initial public offering (IPO) or on the secondary market. 

Types of stockholders

There are two types of stockholders: common stockholders and preferred stockholders.  

• Common stockholders 

Common shareholders are subject to declared common dividends as well as a vote on corporate matters. A person who has acquired at least a single common share of a corporation is referred to as a common shareholder. In the case of bankruptcy, common shareholders are compensated last, following preferred shareholders and debtholders. 

• Preferred stockholders  

Preferred shareholders get dividend payments prior to common shareholders since they have preference over the company’s profits. They have the power to accept or reject important company decisions and they vote for the board of directors.

Role and responsibilities of a stockholder

In a liquidation, stockholders often get their hands on assets first. If a company goes bankrupt, the stockholders will receive their share of the assets before any other creditors. 

While the rights and responsibilities of stockholders can vary depending on the jurisdiction and the type of company, they are typically responsible for voting on the board of directors, making major corporate decisions, and receiving dividends. They may also bring a derivative suit on behalf of the company and are typically first in line to acquire assets in the event of liquidation. 

Examples of stockholders

We already know that there are two types of stockholders: common and preferred. Common stockholders have voting rights and can elect the company’s board of directors. Preferred stockholders do not have voting rights, but they are prioritized over common stockholders when receiving dividends and other distributions. 

There are many benefits to being a stockholder. For example, stockholders can make a profit if the company’s stock price increases. They also have a say in the company’s direction and can hold the board of directors accountable for their actions. 

There are some risks associated with being a stockholder as well. For example, stockholders may lose all their investments if the company goes bankrupt. Additionally, stock prices can be volatile, and stockholders may experience losses if the price falls. 

Importance of stockholder

The stockholders of a company are its most important asset. Without them, the company would not exist. They provide the capital that allows the company to grow and expand its operations. They are also vested in the company’s success and ability to generate profits. 

The stockholders are also the company’s ultimate owners. They have the power to choose the board of directors and to vote on major corporate decisions. They are also entitled to dividend payments on their shares. 

The stockholders play a critical role in a company’s success and its ability to generate shareholder value. They provide the capital that allows the company to grow and expand its operations. They also have a vested interest in the success of the company. 

Frequently Asked Questions