Shareholder

In any business, a shareholder is someone who owns a portion of the company with at least one share of the company’s stock or mutual fund shares. Think of the company as a pizza divided into different-sized slices, where each slice represents the shareholder based on how much they own. 

What is a Shareholder?

Shareholders also play a vital role in the business, where they get the right to partake in business decisions in shareholder meetings, approve the board of directors, etc.

When the company thrives and earns hefty profits, shareholders can, in turn, receive increased stock valuations or dividends (a percentage of the company’s earnings). However, if the company fails, any of the company’s remaining assets can be claimed, given that all company debts have been paid. 

Difference between Shareholder and Stakeholder

Shareholders are individuals or entities that own shares in a company, making them part owners with a financial stake in the company’s success or failure.

Stakeholders, on the other hand, are any individuals or groups who have an interest in or are affected by a company’s actions, including shareholders, but also including employees, customers, suppliers, communities and the environment.

Shareholders are essentially a subset of stakeholders.

Difference between Shareholders and Directors

There is a common misconception regarding shareholders and directors that the two play similar roles, which is false. Shareholders simply own the company’s shares while the director manages these shares.

In addition, the shareholder and the director have two distinct roles, which means the director does not have to be a shareholder, nor does the shareholder have the right to be a director, unless stated on paper. 

Please note that every shareholder in a private company or a public company has the right to the following: 

• Voting power (this also includes votes to remove directors).
• Claim to company dividends.
• Ownership transfer.
• Inspect or review corporate documents. 
• Sue for wrongful business acts. 
• Ownership of the company. 

If you are a shareholder, ensure you know and keep these rights in mind. It is also important to note that a director technically can remove a shareholder given that they have at least 75% majority of votes in favour and the shareholder in question has less than 25% of the company share; otherwise, it is a straight no.