Knowing What Shareholder Is: Definition, Types, Rights Obtained

Illustration of a shareholder (Photo: Pixabay/graphixmade)

YOGYAKARTA – In the business world, there is a term called shareholder. This term is used to refer to a stakeholder in a company. So, for those of you who want to know more about what a shareholder is, check out the following article.

Get to know what Shareholder is

Adapted from the Investopedia page, a shareholder is a person, company or institution that owns at least one share of the company.

Originally, shareholders were company owners who had certain rights and responsibilities. This type of ownership allows shareholders to gain returns from business success.

The rewards received can be in the form of an increase in the value of shares or financial profits distributed as dividends.

Conversely, if a company's performance declines and its share price contracts, shareholders will experience losses, or face a decline in the values of their portfolio. This means that shareholders can lose their entire investment if the company goes bankrupt.

If at any time the company is liquidated and all its assets are sold, shareholders will receive a portion of the sale money as long as the creditors' rights have been paid.

When a situation like this occurs, the advantage of being a shareholder is that they do not have the obligation to carry debts and other payments owned by the company.

In other words, creditors cannot demand shareholders to pay their company debts.

Types of Shareholders

In the business world, shareholders are divided into two types, including:   

• Common shareholders: Common shareholders are voters of the common shares of a company. This type of shareholder has control over the management of the company. They have the right to file a class action against the company for any mistakes that have the potential to jeopardize business continuity.
• Preferred shareholder: Those who have the rights to some of the company's preferred shares are called preferred shareholders. People who are preferred shareholders do not have control over the management of the company. However, preferred shareholders are entitled to a fixed annual dividend which will be distributed before ordinary shareholders receive their rights.

Rights Obtained By Shareholder

Shareholders have the authority to determine certain aspects related to the running of the company's business.

As shareholders, shareholders have the right to have members of the company board or be involved in making important decisions through elections and voting at shareholder meetings.

The following are the rights owned by people, companies or institutions who act as shareholders in a company:

• The right to inspect the company's books and records.
• Suing the company for bad actions committed by directors or other officials.
• The right to vote on important company issues, such as the appointment of the board of directors as well as deciding whether or not to give the green light to a potential merger.
• The right to receive dividends.
• The right to attend the annual meeting, either in person or via conference call.
• The right to vote on important matters by proxy.
• The right to demand a proportional allocation of proceeds if the company liquidates its assets.

That is information about what a shareholder is. Hopefully this article can broaden the insight of VOI.ID readers.