Types of Shareholders in a Business
A shareholder is a person, or company that holds shares of a business. They are able to vote on major decisions made by the company. They can also earn profits through the appreciation of their share portfolio or from dividend payments made by an organization. Shareholders’ rights and responsibilities are determined by the number of shares they hold. They are divided into categories, such as majority and minorities.
A majority shareholder is a person who owns more than 50% of the shares in a company. This is usually the company’s founders but it could also be another organisation that buys more than 50% of the business’s shares. A majority shareholder is entitled to vote on key decisions, and may choose who is on the company’s board. They may also file lawsuits for any wrongdoing by an organization.
You are considered a minority shareholder if you hold more than 25 percent of the shares in a company. You have the right to vote on key decisions but don’t have a lot of control over the company. Minority shareholders may still bring a lawsuit against the company over wrongdoing they have committed, but they don’t have the same control over the company as the majority shareholders.
There are two types of shareholders that are common shareholders and preferential shareholders. Both have the ability to vote on major decisions and also decide who sits on the company’s board of directors, however the type of shares you own determines your voting rights. Common shareholders have the most number of votes and are entitled to receive dividends if the business makes a profit for the financial year, but they don’t get an assured rate of dividends like preferred shareholders do.
