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Trading and Investment Terms

Shareholder

A shareholder can be defined as an individual, organization, or establishment possesses a minimum one share of an organization's security, which is referred to as equity.

Since shareholders are basically proprietors in an organization, they receive the rewards of a business' prosperity.

These prizes come as increase in the share price, or in the form of financial benefits given out as dividends.

On the other hand, when an organization loses money, the stock price invariably falls, which can lead investors to lose money, or endure falls in the value their portfolios.

An individual shareholder who possesses and has a controlling stake of more than 50% of an organization's outstanding shares is referred to as a majority shareholder, on the other hand the individuals who own less than 50% of an organization's share are referred to as minority shareholders.

A lot of the times, majority shareholders are organization founders. In older organizations, majority shareholders are generally relatives of an organization’s founders.

In either case, by controlling the greater part of an organization's voting interest, majority shareholders have extensive power to impact important operational choices, which includes the change of board members, as well as C-level officials such as chief executive officers (CEOs) and other senior personnel.

Therefore, organizations generally attempt to abstain from having majority shareholders among their ranks.

Besides, in contrast to the proprietors of sole ownership or associations, corporate shareholders are not personally liable for the organization's loans and other monetary obligations.

Therefore, if an organization goes on to become insolvent, its loan provider cannot aim at a shareholder’s personal assets.