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Shareholder and Stock Forms

How Shareholders Influence the Corporation

A shareholder is an investor or owner of shares of stock in a company. A shareholder is also known as a stockholder. Both public and private companies can have shareholders.

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A shareholder is different from a stakeholder. A shareholder, through stock ownership, becomes part owner of a corporation, whereas a stakeholder may not have equity interest in the corporation. However, a stakeholder will be concerned with the performance of the corporation for reasons other than an increase in stock value. Thus, shareholders will always be stakeholders in a company, while stakeholders may not be shareholders.

Shareholder Rights

Shareholders enjoy special rights depending on the type of stock they hold. These privileges may include:

  • he right to buy new shares issued by the corporation
  • the right to share income or earnings of the corporation
  • the right to vote on issues, including election of the board of directors
  • the right to the assets of the corporation during liquidation or winding up

A company's shareholders may define their rights and obligations with the company by means of a shareholders agreement, also referred to as a stockholders agreement. At times, share holders may appoint a shareholder services agent to look after their needs. Shareholder services agents take care of shareholder relations, problems or concerns of the shareholder, and watch over letter to shareholders, record keeping, shareholders equity, and other organizational tasks.

Stockholders are mainly concerned about their returns from investing in shares of a company. Generally, returns on investment are distributed by a corporation by paying dividends out of profits or by increasing the value of the shares compared with the cost of shares originally held by a shareholder.

Corporate Voting

A shareholder has a right to cast a vote in certain matters concerning the corporation in the shareholders meeting. Shareholders who were not able to attend annual meeting of shareholders may vote by proxy. A proxy is an agent lawfully endorsed to perform on behalf of another person. Sometimes, stockholders may enter into a voting agreement in which two or more stockholders accumulate their voting shares for a common purpose.

Types of Stock

Shareholders may invest in a company's equity stock or preferred stock. Equity stock holders will have voting rights attached with it while preferred stock holders normally do not have voting rights but will receive dividends before any dividends are issued to equity shareholders. Preferred stock has other qualities and typically comes with a letter description at the end of the security to denote special rights or privileges. For instance, Class B shares of Berkshire Hathaway are sold under stock ticker BRK.B. How to invest and in what proportion is a decision to be made by the shareholders.


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