Duhaime's Law Dictionary


Shareholder Definition:

Persons who own a share(s) of a for-profit corporation.

Related Terms: Share, Shareholder agreement, Securities, Corporation, Director, Oppressive

As shares are sometimes known as stock, shareholders are sometimes referred to as stockholders.

For-profit corporations are dedicated to earning dividends for their shareholders.

Every corporation must have at least one shareholder in until one share sold to that person, it is doubtful that the corporation has any legal existence. It is not a person until it has a shareholder.

To become a shareholder or to own shares, a person has to give money to the corporation which then issues a proportionate ownership stake; hence, a "share". Unless specifically restricted, a shareholder can sell his/her shares to other persons.

In order to limit interference from disinterested shareholders, persons constituting a corporation often enter into a shareholders agreement which will then bind all future shareholders. In this way, they can control the circulation of shares and the all-important voting rights. Most jurisdictions have legislation setting out the limits of a shareholders agreement.

Shareholders have whatever powers their particular shares give them (see the distinctions between a common share any preferred share).

Shareholders are not responsible for the debts of the corporation.

The shareholders meet annually to resolve matters of significance only, referring to a board of directors the authority to make regular management decisions. The ability to vote on a proposed membership of a board of directors is one of the most important rights of a shareholder.


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