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Shareholders Equity Overview

Shareholders Equity Overview

Shareholder’s equity, as a whole, refers to the overall equity available to the shareholders of a particular company or corporation. Shareholder’s equity is thus equal to the total assets of the company less the total liabilities of the company, as the company’s creditors and liabilities will always have first claim to the assets and property of that company.
Shareholder’s equity is whatever is left, then, after the debts have been paid out of the company’s assets. Shareholder’s equity is then split up among the individual shareholders in a fashion corresponding to how many shares each individual shareholder may hold. Thus, an individual shareholder’s equity will be some portion of the overall equite for all shareholders.
Essentially, understanding the notion of a shareholder’s equity necessitates understanding the relationship between a shareholder and the company in which he, she, or it holds stock. A shareholder’s equity arises from the fact that a shareholder has essentially invested some amount of money into the company by buying a piece of its stock, and thus, is owed some amount of the company’s property.
As mentioned above, creditors and liabilities always have the first priority over a given company’s assets, which means that shareholder’s equity is only taken out of what is left. Then what is left is owned, in some fashion, by the various shareholders. Shareholder’s equity is of particular significance in terms of cases when a company is dissolved through liquidation or bankruptcy, as in such cases, determining the disposition of the company’s assets is important.

Shareholders Agreement At A Glance

Shareholders Agreement At A Glance

A shareholder’s agreement is a document which creates rules and bindings for a given company on the behalf of the shareholders of that company. A shareholder agreement can essentially function as the constitution for a given company, determining the exact procedures and methods of operation for that company. This is because the shareholders of the company are technically the ones who own that company, as they hold shareholder value in the company, and as such, they have some degree of control within that company.
Many companies and corporations will already have constitutions in place, and thus will not necessarily have some core shareholder’s agreement, even though the shareholders hold shareholder value in that company. However, particularly in cases where there are relatively few shareholders for the company as a whole, it may be possible for the shareholders to come together and form a new shareholder agreement in order to supersede the constitution of the company as it existed previously.
A shareholder’s agreement is technically a private agreement and contract, which means it may not be available for public inspection. In that event, it also allows for numerous other options which might not be available in a more strict constitution of a company. For instance, as long as a shareholder continues to hold shareholder value in the company, he or she might suggest an adjustment to the shareholder agreement, which would be much more possible in the case of a shareholder’s agreement than it would be in the case of a company constitution.