What is a shareholder?
A shareholder is an individual or company that owns shares in a company. Alternatively, shareholders can be referred to as members of the company.
If a shareholder owns 51% or more of company shares, they are the majority shareholder and therefore the majority owner of the company, often known as the beneficial owner. Depending on the shares held they can enjoy rights such as:
- entitlement to dividends
- power to sue the company for the misdeeds of its directors
- right to vote on key matters
- right to inspect the company’s books
- right to attend annual meetings
Who can be a shareholder?
Anyone can be a shareholder of a private limited company as there are no restrictions on a shareholder’s age, geographical location or how many companies they can own shares in.
Is a shareholder also a director?
A shareholder is not the same as a director. A shareholder owns a percentage of the company and makes important decisions for the long-term running of the company, whereas a director is appointed by the shareholders to run the company on a day-to-day basis. However, a shareholder can be a director and vice versa, which is very common in small companies.
Also Read: What Documents Can Be Used for An Identity Check
How many shareholders are required?
A company is required to have at least one shareholder on incorporation of the company, but there is no upper limit on how many shareholders a company can have or when the shares can be allotted to existing or new shareholders.
Also Read: Companies House Reforms
What does a shareholder do?
A shareholder makes decisions on the most important matters, such as appointing and removing directors, making decisions by way of ordinary or special resolutions, and more.
Shareholders do not manage the day-to-day running of the company unless they are appointed as a director too.
Shareholders, depending on the shares held, will be entitled to receive a share of the company profits as a dividend. If a company is facing financial difficulties and is wound up, shareholders are only liable for the nominal value of their shares that remains unpaid.
Also Read: 8 things to consider before setting up your own limited company
How do shareholders cease to be shareholders?
If a shareholder wants to remove themselves from company ownership, they can transfer their shares to another individual or a company by completing a stock transfer form and updating Companies House with a confirmation statement filing.
Next steps
Unsure about your shareholder rights? Want to transfer shares to another shareholder? 1st Choice Incorporations are here to help and simplify what may be a confusing process. Call or email our team to discuss your company needs.
Also Read: A Guide to Company Shares
