Shareholder A shareholder or stockholder is an individual or company including a corporation that legally owns one or more shares of stock in a joint stock company. Both private and public traded companies have shareholders. Shareholders are a one type of stakeholderswhich may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders.
Shareholder A shareholder or stockholder is an individual or company including a corporation that legally owns one or more shares of stock in a joint stock company. Both private and public traded companies have shareholders. Shareholders are granted special privileges depending on the class of stock, including the right to vote on matters such as elections to the board of directorsthe right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company.
However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors. Shareholders are one type of stakeholderswho may include anyone who has a direct or indirect equity interest in the business entity or someone with a non-equity interest in a non-profit organization.
Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders. Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.
However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in CaliforniaUSAmajority shareholders of closely held corporations have a duty not to destroy the value of the shares held by minority shareholders. Application[ edit ] The owners of a private company may want additional capital to invest in new projects within the company.
They may also simply wish to reduce their holding, freeing up capital for their own private use.
They can achieve these goals by selling shares in the company to the general public, through a sale on a stock exchange. This process is called an initial public offeringor IPO. By selling shares they can sell part or all of the company to many part-owners.
The purchase of one share entitles the owner of that share to literally share in the ownership of the company, a fraction of the decision-making power, and potentially a fraction of the profits, which the company may issue as dividends. The owner may also inherit debt and even litigation. In the common case of a publicly traded corporation, where there may be thousands of shareholders, it is impractical to have all of them making the daily decisions required to run a company.
Thus, the shareholders will use their shares as votes in the election of members of the board of directors of the company. In a typical case, each share constitutes one vote. Corporations may, however, issue different classes of shares, which may have different voting rights. Owning the majority of the shares allows other shareholders to be out-voted — effective control rests with the majority shareholder or shareholders acting in concert.
In this way the original owners of the company often still have control of the company. This is because the company is considered a legal person, thus it owns all its assets itself. This is important in areas such as insurance, which must be in the name of the company and not the main shareholder.
In most countries, boards of directors and company managers have a fiduciary responsibility to run the company in the interests of its stockholders. Nonetheless, as Martin Whitman writes: Instead, there are both "communities of interest" and "conflicts of interest" between stockholders principal and management agent.A stock derivative is any financial instrument for which the underlying asset is the price of an equity.
Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm's stock, e.g.
single-stock futures.. Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date.
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