Shareholder Legal Definition

Companies must file reports with the Securities and Exchange Commission (SEC) to keep shareholders informed of certain matters. For example, companies file annual and quarterly reports to share financial information and updates with shareholders. n. The owner of one or more shares of a corporation, commonly referred to as a “shareholder”. The benefits of a shareholder include receiving dividends for each share determined by the board of directors, voting rights (with the exception of certain preferred shares) for board members, filing a derivative share (lawsuit) if the corporation is mismanaged, and participating in the division of assets upon dissolution and dissolution of the corporation if there is value. A shareholder must have his or her name registered with the corporation, but may have a share certificate issued to him. Prior to registration, the new shareholder may not be able to vote represented by the shares. Economic rights. Shareholders invest in companies in order to generate returns on investment through economic gains. Shareholders are entitled to the profits of a corporation through the payment of dividends or the sale of shares. In addition, if a corporation goes bankrupt, shareholders are entitled to the net proceeds of the corporation upon dissolution pursuant to Section 281(a) of the Delaware Code. A beneficial shareholder is the person who has the economic benefit of ownership of the shares, while a designated shareholder is the person registered as the owner in the company`s register, while effectively acting for and under the direction of the beneficiary, whether disclosed or not. In many cases, the majority shareholders are company founders.

In older companies, the majority shareholders are often the descendants of a company founder. In both cases, by controlling more than half of a company`s voting power, controlling shareholders wield considerable power to influence key operational decisions, including the replacement of board members and senior executives such as CEOs and other senior executives. For this reason, companies often try to avoid majority shareholders in their ranks. In addition, unlike owners of sole proprietorships or partnerships, shareholders of the company are not personally liable for the debts and other financial obligations of the company. Therefore, when a company becomes insolvent, its creditors cannot target a shareholder`s personal assets. A single shareholder who owns and controls more than 50% of a company`s outstanding shares is called a majority shareholder, while those who own less than 50% of a company`s shares are classified as minority shareholders. According to a company`s articles of association, shareholders traditionally enjoy the following rights: A shareholder`s influence on the company is determined by the shareholding. The shareholders of a company are legally distinct from the company itself. They are generally not liable for the company`s debts and the shareholders` liability for the company`s debts is limited to the price of the unpaid share, unless a shareholder has offered guarantees. The company is not required to register beneficial ownership of an interest, but only the owner as entered in the register. If more than one person is registered as the owner of an interest, the first person is deemed to have control of the interest and all correspondence and communications of the Company will be with that person.

“One of the most important rights of shareholders is their voting rights, as it allows them to influence the composition of management,” says David Clark, lawyer and partner at The Clark Law Office. “Shareholders elect the board of directors that runs the company. Their ownership of the company is also protected by law by giving them the right to purchase shares of the company before they are offered to the public. You can become a shareholder by investing in a publicly traded company. In exchange for the capital injection, the companies offer shareholders certain voting rights and decisions concerning the company. The above rights can generally be divided into (1) treasury rights and (2) voting rights. Although the value of shares is primarily determined by the cash rights they carry (“money is king”), voting rights can also be valuable.