Types of Shareholders in a Business

A shareholder is an individual or entity that owns shares in a company and is therefore able to be a vote-taker in major company decisions. They also make money from the appreciation of their share portfolio or through dividends paid by the business. Shareholders’ rights as well as duties are determined by the amount of shares they own. They can companylisting.info/2021/04/06/understanding-types-of-companies/ be divided into categories such as majority and minorities.

A majority shareholder is someone who has more than 50% of the shares in a business. It is typically the company’s founders, but it can also be another organisation that buys more than 50% of the business’s shares. A majority shareholder has the right to vote on key decisions and choose who sits on the company’s board. They also have the power to bring lawsuits against an entity for any wrongdoing done by it.

If you own over 25 percent of the company’s shares you’re a minority shareholder. You are entitled to vote on major decisions but do not have much control over the company. Minority shareholders can still sue the company for any mistakes it has committed, but they do not have the same amount of control as the majority shareholders.

There are two types of shareholders that are common shareholders and preferential shareholders. Both are able to vote on major decisions, and can choose who will sit on the board of directors. However, the type you own determines the voting rights. Common shareholders have the highest amount of votes and are entitled to receive dividends when the company makes a profit during the financial year however, they don’t receive an assured rate of dividends as preferred shareholders do.