A shareholder is a person or corporation that holds a part-ownership of a company by purchasing shares in the stock market. Dividends are paid to shareholders when the company increases its stock value and profits. Shareholders aren’t personally responsible for the debts and obligations of the company, but they are liable when they invest their money in it.
Shareholders can be classified into two broad categories: those who own common shares as well as those who hold preferred shares. It is also possible for businesses to further break them down on a class basis with different rights being associated with the various classes of shares.
Common shares are typically given to employees as a percentage of their pay with the holders gaining voting rights on matters that affect the business, and also receiving dividends from the company’s profit. When it comes to the right of assets to be liquidated in a business liquidation, they are ranked behind preference shareholders.
Preferred shareholders are not allowed to be part of management decisions. The dividend rate isn’t fixed and can change based on the performance of the company in any particular year. They are also paid before the common share is dissolved in the event of a company’s liquidation. Shareholders also enjoy other rights, such as the possibility of receiving a preferential or special dividend, or no dividend.