Who Is A Shareholder: Everything You Must Know

4 min read | Updated on September 02, 2025, 14:56 IST

About Upstox

Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.

Shareholders are the most crucial entity of any stock exchange, as they are the ones who conduct the trading. While the prima facie benefit of being a shareholder is that you own the shares you hold, is that all? Also, do shareholders only have rights without any corresponding obligations? Well, let’s find out.

Who Is A Shareholder?

A shareholder is someone who legally owns at least one share of a company’s stock. By owning a share, the person holds a portion of the company and is entitled to certain rights, such as receiving dividends and voting on company matters.

Key Characteristics of Shareholders:

A shareholder owns at least one unit of equity in a company.
They invest their money in shares to earn returns.
Shareholders can vote on corporate policies and the election of the board.
They are different from stakeholders, who may have an interest in the company without owning shares.
Shareholders can be individuals or large institutional investors.

Types of Shareholders

There is more than one type of shareholder. They are usually categorised based on the kind of shares they hold and their role in the financial ecosystem.

Based on shares owned:

Common Shareholders

Common shareholders are those who own ordinary or equity shares.

They receive dividends after preferred shareholders.
They enjoy voting rights in major company decisions, such as electing board members.

Preferred Shareholders

Shareholders who hold preference shares are called preferred shareholders.

They receive fixed dividends before common shareholders.
They usually don’t have voting rights in company matters or annual general meetings.
Even when they get to exercise their voting rights, it is limited.

Based on their status:

Individual Shareholders

As the name suggests, these are individuals who own shares in a company.

They can own equity or preference shares.
As they purchase shares for personal investment, they are called retail investors.
They usually invest in smaller quantities compared to institutions.

Institutional Shareholders

Institutional shareholders are large organisations that invest heavily in companies.

Just like individual shareholders, they can also own both equity and preferred shares of a company.
They can include mutual funds, banks, and pension funds.
Due to the scale of their investments, they often influence company policies.

Rights Of Shareholders

Shareholders, particularly equity shareholders, have several rights in the company. These rights not only enable the shareholders to protect their investment and maximise their returns but also to influence company policies, even to a limited extent. However, depending on the type of shareholder you are, you may exercise full or limited rights. So let’s see what rights shareholders enjoy:

Rights of Shareholders: Equity vs. Preference

Right	Explanation	Equity vs. Preference Shareholders
Voting Rights	Shareholders can vote on key matters like electing board members or approving mergers, directly or via proxy, at the general meeting.	Equity shareholders have full voting rights; preference shareholders typically do not.
Dividend Rights	Shareholders are entitled to a share of the company’s profits as dividends, depending on board approval and company performance.	Preference shareholders receive fixed dividends first; equity shareholders get variable dividends later.
Right to Inspect Books	Shareholders can inspect certain financial and operational documents to assess the company’s health and performance.	Both equity and preference shareholders generally have this right.
Right to Sue	Shareholders may sue company directors for fraud, mismanagement, or actions harming shareholder interests.	Both equity and preference shareholders can exercise this right equally.
Right to Transfer Ownership	Shareholders may sell or transfer their shares unless restricted by agreements or company rules.	Both types can typically transfer ownership unless contractual limitations exist.

Responsibilities of Shareholders

As partial owners of a company, shareholders not only have rights but also have certain responsibilities. So, let's have a look at the various duties of a shareholder:

Responsibility	Explanation
Stay Informed	Shareholders should regularly review the company's financial statements, updates, and performance reports.
Exercise Voting Rights	Shareholders should exercise their voting rights carefully, especially in cases of major issues, such as board elections and strategic proposals.
Participate in Meetings	While not mandatory, attending AGMs helps shareholders understand decisions made and voice their concerns or provide approvals.
Avoid Insider Trading	Shareholders are obligated not to misuse any confidential information they might have for personal advantage.
Understand Investment Risks	Shareholders should regularly assess market risks and make informed decisions based on their judgment.

Conclusion

If you trade in the stock market or have made some investments there, you are already a shareholder. While being a shareholder comes with several benefits and rights, it also entails a few responsibilities. Knowing these will help you to manage your investment and maximise your profits.

FAQs

Can a shareholder work for the same company?

Yes, a shareholder can also be an employee, but owning shares doesn't automatically entitle one to a job in the company.

Do shareholders receive updates from the company?

Yes, shareholders often receive annual reports, earnings updates, and meeting invitations from the company via email or physical mail.

Are shareholders liable for company debts?

No, shareholders are not personally liable for the company's debts. Their financial risk is limited to the value of their invested shares.

Can minors become shareholders?

Yes, but shares must be held in a custodial account under a guardian or trustee until the minor reaches the age of legal adulthood.

What happens to shares if a shareholder dies?

The shares are transferred to the legal heirs or nominees in accordance with the succession laws or the instructions left in a will.

About Author

Upstox Desk

Team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.