A shareholder is an individual or entity that owns the shares of a corporation. Share ownership entitles a shareholder to certain rights, which usually include the following for a common stockholder:
- To vote for the Board of Directors of the corporation
- To receive dividends when declared by the Board of Directors
- To receive the annual financial statements of the business, once they are made available for issuance
There may be only a small number of shareholders (as is common with a privately-held business), or there may be thousands, as is common for a publicly-held company whose shares trade on a major stock exchange.
Shareholders buy shares in a business with the intent of earning a profit either from dividend payments made by the company, or through an appreciation in the market price of the shares. They may also buy shares in order to gain control over a business.
In the event of the liquidation or sale of a business, shareholders have residual rights to any remaining assets. This means that all creditors are paid from the assets or proceeds of the business first, after which remaining funds (if any) are distributed to the shareholders based their relative proportions of ownership of the business. If there are no residual assets remaining after creditors have been paid, then the shareholders will have lost their investment in the business.
Conceptually, shareholders have the greatest risk of loss of any stakeholders in a business, but can also profit the most handsomely from an increase in the value of the business.
A shareholder is also known as a stockholder.