A shareholder is a person or entity that holds shares in a business and is therefore able to take part in major company decisions. They can also earn a profit from the appreciation of their portfolio or dividend payments. Shareholders’ rights as well as duties are determined by the amount of shares they own. They can be divided into categories, such as minority and majority.
A person who owns over 50% of a company’s shares is a majority shareholder. It is usually the founders, but can also be an organisation that buys more than 50 percent of the shares in a company. A majority shareholder has the right to vote on key decisions and decide who is on the company’s board. They may also file lawsuits for any wrongdoing of a company.
If you own more than 25% of the company’s shares you’re a minority shareholder. You have the right to vote on important company decisions however, you don’t have a lot of influence over it. Minority shareholders can still pursue the company for wrongdoings they’ve committed, however they don’t have the same amount of control as the majority shareholders.
There are two broad types of shareholders in a business that are common shareholders and preferred shareholders. Both can vote on important decisions, and they also have the ability to choose who will sit on the board of directors. However the type of shareholder you have determines the voting rights. Common shareholders are the ones with the highest number of votes, and they get dividends if they earn a profit during the financial year. However they don’t receive an unrestricted dividend like preferred shareholders.
