The Role of a Shareholder in a Company

A shareholder is a legal entity which has some ownership of a share or shares within a joint stock company. A shareholder might be an individual person or a company itself. Shareholders technically are the parties that own a company, and thus, the purpose of a company owned by shareholders is generally to increase the value of every shareholder's share. This purpose is borne out usually as a result of a shareholder being capable of influencing the actual policies and conduct of the company in which he or she owns a share or shares.

A shareholder might have such powers within a company as the ability to vote on certain matters internal to the operation of the company and the ability to propose and advocate resolutions within the company, in addition to any rights the shareholder might hold towards the property of the company and the company's profits. None of these rights are necessarily uniform, however, as each company might grant a shareholder a somewhat different set of rights.

Furthermore, under law, shareholders do not have as much of a right to the assets of a company, including property and profits, as do creditors. In other words, creditors have first claim to such assets and if no property is left after creditors have laid their claim, then the shareholders will not get any property out of the company in the event of its dissolution. Usually, the power and claim a shareholder holds with reference to a company is equal to how many shares that shareholder has in the company.

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