Shareholder

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A shareholder (also stockholder) is an individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation. Legally, a person is not a shareholder in a corporation until their name and other details are entered in the corporation's register of shareholders or members. [1]

An individual is that which exists as a distinct entity. Individuality is the state or quality of being an individual; particularly of being a person separate from other people and possessing their own needs or goals, rights and responsibilities. The exact definition of an individual is important in the fields of biology, law, and philosophy.

Corporation Separate legal entity that has been incorporated through a legislative or registration process established through legislation

A corporation is an organization, usually a group of people or a company, authorized to act as a single entity and recognized as such in law. Early incorporated entities were established by charter. Most jurisdictions now allow the creation of new corporations through registration.

Share (finance) single unit of ownership in a corporation, mutual fund, or any other organization

In financial markets, a share is a unit used as mutual funds, limited partnerships, and real estate investment trusts. The owner of shares in the corporation/company is a shareholder of the corporation. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.

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The influence of a shareholder on the business is determined by the shareholding percentage owned. Shareholders of a corporation are legally separate from the corporation itself. They are generally not liable for the debts of the corporation and the shareholders' liability for company debts are said to be limited to the unpaid share price unless if a shareholder has offered guarantees. The corporation is not required to record the beneficial ownership of a shareholding, only the owner as recorded on the register. When more than one person are on the record as owners of a shareholding, the first one on the record is taken to have control of the shareholding, and all correspondence and communication by the company will be with that person.

Shareholders may have acquired their shares in the primary market by subscribing to the IPOs and thus provided capital to the corporation. However, most shareholders acquire shares in the secondary market and provided no capital directly to the corporation. Shareholders may be granted special privileges depending on a share class. The board of directors of a corporation generally governs a corporation for the benefit of shareholders.

The primary market is the part of the capital market that deals with the issuance and sale of equity-backed securities to investors directly by the issuer. Investor buy securities that were never traded before. Primary markets create long term instruments through which corporate entities raise funds from the capital market. It is also known as the New Issue Market (NIM).

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Secondary market company

The secondary market, also called the aftermarket and follow on public offering is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac.

Shareholders are considered by some to be a subset of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, employees, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.

In mathematics, a set A is a subset of a set B, or equivalently B is a superset of A, if A is "contained" inside B, that is, all elements of A are also elements of B. A and B may coincide. The relationship of one set being a subset of another is called inclusion or sometimes containment. A is a subset of B may also be expressed as B includes A; or A is included in B.

In a corporation, a stakeholder is a member of "groups without whose support the organization would cease to exist", as defined in the first usage of the word in a 1963 internal memorandum at the Stanford Research Institute. The theory was later developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibility (CSR).The definition of corporate responsibilities through a classification of stakeholders to consider has been criticised as creating a false dichotomy between the "shareholder model" and the "stakeholders model" or a false analogy of the obligations towards shareholders and other interested parties.

Types

A beneficial shareholder is the person that has the economic benefit of ownership of the shares, while a nominee shareholder is the person who is on the corporation's register as the owner while being in fact acting for the benefit and at the direction of the beneficiary, whether disclosed or not.

Primarily, there are two types of shareholders.

Common Shareholders

An individual or an institution can be a common shareholder who owns common shares within a company. This type of shareholding is more common. Common shareholders have the right to influence decisions concerning the company and can file class action lawsuits in case any wrongdoing happens. [2]

Preferred Shareholders

A preferred shareholder is rare. In this, the shareholder is paid a fixed sum of dividend even before the common shareholders and they have no voting rights within the company.

Rights

Subject to the applicable laws, the rules of the corporation and any shareholders’ agreement, shareholders may have the right:

With respect to public companies in the United States, a shareholder resolution is a proposal submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insistence for a vote. For publicly held corporations in the United States, the submission and handling of resolutions is regulated by the Securities and Exchange Commission (SEC).

Dividend payment made by a corporation to its shareholders, usually as a distribution of profits

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business and pay a proportion of the profit as a dividend to shareholders. Distribution to shareholders may be in cash or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase. When dividends are paid, shareholders typically must pay income taxes, and the corporation does not receive a corporate income tax deduction for the dividend payments.

Asset economic resource, from which future economic benefits are expected

In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash. The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

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Equity (finance) difference between the value of the assets/interest and the cost of the liabilities of something owned

In accounting, equity is the difference between the value of the assets and the value of the liabilities of something owned. It is governed by the following equation:

Corporate action

A corporate action is an event initiated by a public company that will bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's board of directors and authorized by the shareholders. Examples of corporate actions include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.

Joint-stock company business entity which is owned by shareholders

A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

Incorporation (business) the forming of a new corporation

Incorporation is the formation of a new corporation. The corporation may be a business, a nonprofit organization, sports club, or a government of a new city or town.

Preferred stock type of stock which may have any combination of features not possessed by common stock

Preferred stock is a form of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferred stocks are senior to common stock, but subordinate to bonds in terms of claim and may have priority over common stock in the payment of dividends and upon liquidation. Terms of the preferred stock are described in the issuing company's articles of association or articles of incorporation.

Common stock form of corporate equity ownership, a type of security

Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently in other parts of the world; "common stock" being primarily used in the United States. They are known as Equity shares or Ordinary shares in the UK and other Commonwealth realms. This type of share gives the stockholder the right to share in the profits of the company, and to vote on matters of corporate policy and the composition of the members of the board of directors.

A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels. The taxes may also be referred to as income tax or capital tax. Partnerships are generally not taxed at the entity level. A country's corporate tax may apply to:

Corporate law body of law that applies to the rights, relations, and conduct of persons, companies, organizations and businesses

Corporate law is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. It refers to the legal practice relating to, or the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders. It became popular during the 1980s, and is particularly associated with former CEO of General Electric, Jack Welch.

The phrase street name securities or "nominee name securities" is used in the United States to refer to securities of companies which are held electronically in the account of a stockbroker or bank or custodian, similar to a bank account. The entity whose name is recorded as the legal owner of the securities is known as the "nominee owner," and that entity has ownership rights in the security. The nominee owner holds those ownership rights on behalf of the true economic owner who is referred to as the beneficial owner. In the US, Cede & Co., a nominee of Depository Trust Company, is typically the largest stockholder of a company. In the US where Cede & Co. is the street name holder, therefore, all beneficial rights such as voting rights and dividends flow first to the nominee holder Cede, and then are passed onward, and ultimately to the beneficial owners. In the United Kingdom this is known as holding shares in a nominee account.

A bearer instrument is a document that entitles the holder of the document rights of ownership or title to the underlying property, such as shares or bonds. Unlike normal registered instruments, no record is kept of who owns bearer instruments or of transactions involving transfer of ownership, enabling the owner to deal with the property anonymously. Whoever physically holds the bearer document is assumed to be the owner of the property, and the rights arising therefrom, such as dividends.

Beneficial ownership is a term in domestic and international commercial law that refers to anyone who enjoys the benefits of ownership of a security or property, without being on the record as being the owner. Webster's defines a beneficial owner as "one who enjoys the benefit of a property of which another is the legal owner." The legal owner may be described as the "registered owner", and if they are not the beneficial owner they may be described as a "nominee".

A company, abbreviated as co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise. Company members share a common purpose, and unite to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals. Companies take various forms, such as:

Stock certificate legal document certifying ownership of company shares

In corporate law, a stock certificate is a legal document that certifies ownership of a specific number of shares or stock in a corporation. Historically, certificates may have been required to evidence entitlement to dividends, with a receipt for the payment being endorsed on the back; and the original certificate may have been required to be provided to effect the transfer of the shareholding. Over time, these functions have been rendered redundant by statutory schemes to streamline the administrative burden on corporations, and to facilitate and streamline trading on a stock exchange. For example, most jurisdictions now impose an obligation on corporations to pay dividends to shareholders registered at a relevant point of time without the need to produce the share certificate as proof of entitlement and the certificate is no longer required to be produced with a transfer of a shareholding. In some jurisdictions today, the issue of paper stock certificates may be dispensed with, at least in some circumstances, and many corporations now provide a holding statement in lieu of a share certificate for each parcel of shares owned.

There are many ways in which a business may be owned under the legal system of England and Wales.

United Kingdom company law corporate law of the United Kingdom

The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more of wealth in the United Kingdom economy than any other form of organisation. The United Kingdom was the first country to draft modern corporation statutes, where through a simple registration procedure any investors could incorporate, limit liability to their commercial creditors in the event of business insolvency, and where management was delegated to a centralised board of directors. An influential model within Europe, the Commonwealth and as an international standard setter, UK law has always given people broad freedom to design the internal company rules, so long as the mandatory minimum rights of investors under its legislation are complied with.

Stock financial instrument

The stock of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are commonly known as "stocks". A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.

South African company law

South African company law is that body of rules which regulates corporations formed under the Companies Act. A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by which partnerships and trusts are governed in South Africa, together with cooperatives and sole proprietorships.

Anguillan company law is primarily codified in three principal statutes:

  1. the International Business Companies Act ;
  2. the Companies Act ; and
  3. the Limited Liability Companies Act.

References

  1. Fontinelle, Amy (26 November 2003). "Shareholder". investopedia.com.
  2. "Shareholder - Definition, Roles, and Types of Shareholders". Corporate Finance Institute. Retrieved 2019-02-19.
  3. 1 2 3 4 5 6 7 Velasco, Julian (2006). "The Fundamental Rights of the Shareholder" (PDF). UC Davis L. Rev. 40: 407–467. Retrieved 16 April 2018.