What is Share Holders in company and its Types 2022
Shareholders are a company’s owners and the ones who have invested money in it. They are usually given certain voting rights within the company and maybe rewarded with dividends, which are payments made by the company out of its profits. Shareholders may also benefit from a rise in the value of their shares if the company does well.
There are different types of shareholders, and their roles can vary. Shareholders may be individuals, companies or trusts. They may be residents in the UK or abroad. The main types of shareholders are:
- Ordinary shareholders: these are the most common type of shareholders and hold ordinary shares. They have voting rights and a share in the company’s profits (or losses)
- Preferred shareholders: these shareholders have preferential rights over the company’s assets if it goes bankrupt. They usually receive a fixed dividend and may have voting rights.
- Shareholders with warrants: these shareholders have the right to buy new shares in the company at a set price, known as the warrant price.
- Shareholders with convertible loans: these shareholders have a loan from the company that can be converted into shares at a set price.
- Shareholders with debentures: these shareholders have a loan from the company that is secured against the company’s assets. If the company goes bankrupt, the shareholders may lose their investment
The main functions of shareholders are:
- To appoint and remove directors.
- To approve or reject changes to the company’s articles of association
- To approve the company’s annual accounts and financial statements
- To receive distributions (dividends) from the company’s profits
Shareholders may also have other rights, depending on their type of shareholding. For example, preferred shareholders may have the right to be first in line to receive payments if the company goes bankrupt. Shareholders with warrants may have the right to buy new shares in the company at a set price. Shareholders with convertible loans may have the right to convert their loan into shares at a set price. Shareholders with debentures may have the right to receive priority over other creditors if the company goes bankrupt.
The role of shareholders is important in ensuring that a company is run in the best interests of its owners. Shareholders can hold directors to account and can approve or reject changes to the company’s articles of association, annual accounts and financial statements. They can also receive distributions (dividends) from the company’s profits. Shareholders can play an important role in ensuring that a company is well managed and that its owners get a return on their investment.