DEFINITION of 'Shareholder'

Any person, company or other institution that owns at least one share of a company’s stock. Shareholders are a company's owners. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly. A shareholder may also be referred to as a "stockholder".

BREAKING DOWN 'Shareholder'

Unlike the owners of sole proprietorships or partnerships, corporate shareholders are not personally liable for the company’s debts and other obligations. Also, corporate shareholders do not play a major role in running the company. The board of directors and executive management perform that function. Common stockholders are, however, able to vote on corporate matters, such as who sits on the board of directors and whether a proposed merger should go through (preferred stockholders usually do not have voting rights). They also benefit when the company performs well and its share price increases, and they have the right to trade their shares on a stock exchange, which makes stock a highly liquid investment.

Shareholders do have rights, which are defined in the corporation’s charter and bylaws. They can inspect the company’s books and records, sue the corporation for misdeeds of the directors and officers, and if the company liquidates, they have a right to a share of the proceeds. However, creditors, bondholders and preferred stockholders have precedence over common stockholders in a liquidation. Shareholders also have a right to receive a portion of any dividends the company declares.

Shareholders can attend the corporation’s annual meeting to learn about the company’s performance, vote on who sits on the board of directors and other matters. They can also listen to the meeting via conference call and vote by proxy through the mail or online. To learn more about a company’s policies toward shareholders, consult the company’s corporate governance policies.

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