A shareholder is a person or an entity that holds shares in a business and is therefore able to vote on major company decisions. They can also earn a profit through the increase in their share portfolio or through dividends paid by an organization. Shareholders’ rights as well as duties are determined by the number of shares they own. They are divided into categories such as majority and minorities.
A majority shareholder is one who owns more than 50% of the shares of a company. It is typically the founders of a company but it could also be a different company that buys over 50% of the company’s shares. A majority shareholder can make important decisions and select who sits on the board. They can also file lawsuits for any wrongdoing of a company.
You are considered a minority shareholder if you have more than 25% of the shares in the company. You have the right to vote on key decisions but don’t have a lot of influence over the company. Minority shareholders can still sue the company for any wrongdoing they have committed, but they don’t have the same authority as the majority shareholders.
There are two types of shareholders that are common shareholders and preferential shareholders. Both can vote on key decision-making, and both can select who sits on the board of directors. However, the type you own determines the voting rights. Common shareholders have the most number of votes. They are also entitled to receive dividends if the company earns a profit during the year, however, they don’t receive an assured rate of dividend payout like preferred shareholders do.
