Type of shareholders in a public listed company?

Type of shareholders in a public listed company?

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Created By Admin Last Updated Wed, 05-Aug-2020

Type of shareholders in a public listed company?

Shares of a listed company can be acquired by any person who wants to have ownership in the company. Shareholders typically receive declared dividends if the company does well and make profits.

There are 2 types of shares a company can issue- Ordinary shares and Preferential shares.

Common shareholders have an ownership stake in the company. This comes with various rights including:

·        The right to vote on major decisions of the company, such as board elections, or how to respond to an aggressive takeover.

·        The right to receive any common dividends the board declares.

·        The right to participate in a distribution of assets when the company is liquidated.

·         The right to file a class-action lawsuit against the company if there is an act of wrongdoing that potentially harms the company or negatively affects the value of its common shares.

This enables them to exercise considerable control over how the company is managed and how it handles strategies for growth.

Whereas Preferred stockholders own a different type of share known as preferred stock. They have no voting rights, which means they cannot influence management in decision-making.

However, they do have a guaranteed right to be paid a fixed amount of dividends every year and to receive this payment before the company pays a dividend to common shareholders. The amount of dividend is fixed or attaches to a specified interest rate

Both common stock and preferred stock can go up in value if the company is doing well. However, common stock is more volatile and tends to experience much larger capital gains – or losses – than preferred stock.

The right to receive a fixed dividend means that preferred stock behaves more like debt than a common share. Investors who wish to generate a predictable investment income rather than ride the volatility of the stock market typically choose to own preferred shares.

Who all can buy shares in a company:

1)     Individuals

2)     Financial institutions

3)     Foreign Shareholders called as FII (Foreign Institutional Investors)

4)     Domestic companies(Domestic Institutional Investors)

5)     Others such as business corporations, government etc