Issuing shares is one of the sources of raising funds. Companies issue share in the form of common stock and preferred stock. Shareholders are the persons who have ownership interests in the company. They have invested in the company’s securities. If you hold certain shares of ABC Company it represents you partial ownership interest in the company. Share holders are also known as stockholders.

Types of Shareholders or stockholders:

• Common Stockholder or shareholders:

They have a residual claim on assets of a company after the bondholders and creditors.

• Preferred Stockholders or shareholders:

They have priority over the common stock as if company goes insolvent. Bond holders and creditors will have first claim on assets.

Rights of Shareholders:

When you own shares of any Company then you have certain rights that you must know. Here we are going to show you the rights that are found almost similarly every where.

Dividends:

Dividends are offered when shares are issued by the corporations. If so then it is right of each shareholder to receive dividends. Dividends can be..

a. Cash Dividends:

This is the most common type of dividend. It is paid in cash. Shareholders are returned or paid some portion of profits. These can be received by cash or in the form of cheques. They can also be in the form of reinvestment is share of company.

b. Stock Dividends.

They are paid in the form of issuing additional shares to the existing shareholders. It is some percentage announced by corporations. The reason of issuing stock dividends can be the lack of funds. It is also possible that combination of both cash and stock dividends are followed by corporations.

c. Property Dividends:

Dividends can be in the form of any product (asset) that a company produces. It was very popular type of dividend in earlier days when the number of shareholders was very small.

Voting Rights:

Shareholders get one vote for each share they hold. It means that they have right to participate in companies decision making processes i.e. selecting the auditor, electing Board of Directors, making amendments in charter of a company etc. it is possible that some companies may have different classes of stock. i.e. class A or B. and the voting rights may differ in different classes. Shareholders have right to suggest their proposal. This all happens in annual meetings called by corporations.

Ownership Rights:

Corporation issue new shares or extra share in order to give the existing shareholders a right to increase their ownership interest in corporation. The ownership rights say that shareholders can buy or sell their shares to/from any one. You also have a right to let them expire.

Shareholder liability:

Stockholders have a limited liability. They are liable up to their contributions. It depends on the constitution or law of corporation. Shareholder may be liable if any amount that is unpaid regarding shares purchased, for breach of contract etc or any thing that corporation has devised in the law.

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