A Shareholding in Stocks

A person holding stock in a company is known as a shareholder. It could be an individual or a corporation, holding either stock, or penny stock in a company. The individual legally owns a part of the company by holding his shares of the stock in that company. Companies that are private and those that are public both have shareholders, and once listed at the stock exchange, they are expected to try and increase shareholder value.

Shareholders of a company are usually given privileges according to their class of stock. This includes the privilege to vote for the board of directors of the company, to share in repartition of the company’s income, to acquire new shares as issued by the corporation and also the right to the company’s property when it winds up. However, a shareholder’s entitlement to a company’s assets will always be secondary to the rights of creditors of the company.

Directors and officials of a company are bound to act in the shareholders best interest, though shareholders are usually not bound by such duties to each other.

Company owners may need more capital to invest in new ventures within their company, or they may simply require freeing up capital, and redirecting it for their own personal use. When this need arises, they may sell either part of the company or the whole of it to many part owners. This could be also floated to the public as penny stock. One purchasable share entitles the buyer to part of the company, a small part in decision making privileges, and a share in the profits, which are issued as dividend.

In a publicly traded company with thousands of shareholders, all of them cannot have decision making powers, thus they may use of their shares of votes during election of the directors of the board. Typically one share is one vote. Companies, however, issue varying classes of shares, and these with more shares may enjoy different voting privileges.

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