Shareholder (Stockholders): Meaning, Equity, Rights, What It Is, & Types

Who Is A Shareholder?

An individual or organization that owns shares or stocks in a firm is referred to as a shareholder. When a company wants to grow or expand, it must raise money from the market by issuing shares of stock or debentures (i.e., loans). Therefore, those receiving shares are referred to as shareholders. These people or things also referred to as stockholders, are a company’s partial owners and have a right to a portion of its revenues. Dividend payments or an increase in stock value are two ways these earnings are distributed to stockholders. Additionally, shareholders lose money on their investment when a company’s share price declines due to losses it experiences during a particular year.

Roles And Responsibilities Of A Shareholder

Let’s look at some of the responsibilities of a shareholder.

• Set the directors’ pay. The salary must be sufficient to cover the director’s living expenses and the city’s costs without undermining the company’s offers.
• Make sure the dividends are paid out after choosing the pay-out %.
• Pondering and selecting the authority they would give the board of directors, such as the right to appoint and dismiss them from their positions
• Making choices about matters over which the directors have no control, such as making amendments to the company’s constitution
• Examining and approving the company’s financial statements

Rights Of Shareholders

Shareholders of a company are entitled to certain rights. These rights are:

• Voting Power Shareholders have the right to vote on company-specific issues that affect the corporation.
• The right to summon general gatherings Shareholders have the right to convene a general meeting. The Company Law Board may also be contacted for assistance if general body meetings are not conducted legally.
• Partial Ownership of Firm In proportion to the number of shares registered in the holder’s name, they own part of the corporation.
• Right to appoint the company auditors. According to the Companies Act of 2013, the board of directors must appoint the company’s initial auditor. The appointment is typically made for a five-year term, and it may be extended with the passage of a motion at the annual general body meeting. Additionally, the audit committee and board of directors recommend that the shareholders meet them at the annual general body.
• Right to Receive Dividends In the company’s annual general meeting, they can receive the dividend amount decided. They receive the dividend for the shares they own.
• Right to get copies of financial statements. Financial statements are accessible to shareholders as a right. Every company shareholder must receive a quarterly or annual statement containing the company’s financial statements.
• Right to Sue Concerned for Wrongful Acts If they discover any wrongdoing on the part of the corporation, they may choose to bring a lawsuit. Wrongful behaviour may involve violations of morality, discrimination, fraud, etc.

Shareholder vs Stakeholder

Many people mistakenly believe that the terms “shareholder” and “stakeholder” are synonymous since they are frequently used interchangeably. The two names don’t, however, have the same meaning.

Undoubtedly, all shareholders are the company’s stakeholders indeed, they are its most important stakeholders. The opposite, however, is untrue. By purchasing shares of a corporation, shareholders acquire a portion of that business. Since you own stock, you may also be referred to as a stockholder. Stakeholders, like shareholders, are interested in a company’s performance even though they do not own any equity. However, they might or might not be interested in making money.