A shareholder is a business or person that holds part ownership of a company through buying shares on the stock market. Dividends are paid out to shareholders when the company grows its stock value and profits. Shareholders are not personally accountable for the debts and liabilities of the business, but they do have to take on risk when they invest their money in it.

Shareholders can be classified into two companylisting.info/2021/04/06/understanding-types-of-companies/ broad categories: those who own common shares and those holding preferred shares. Companies can also break them down further by class with different rights for each class of shares.

Common shares are often distributed to employees as a part of their remuneration, with the holders enjoying voting rights on matters that affect the business, and also receiving dividends derived from the company’s profits. When it comes to the right of assets in a liquidation, they rank behind preference shareholders.

Preferred shareholders are not allowed to participate in management decisions. The dividend rate isn’t fixed and will change depending on the financial health of the company in any particular year. In addition to this, they are paid before the common shares in a liquidation of the company. Shareholders also have other rights such as the right to receive a preferential or special dividend, or even no dividend.

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