Shareholders can be companies or individuals who invest money in a company through the purchase of shares. They earn a profit or lose money from their investment based on the performance of the company and its ability to pay dividends. They also get the benefit of capital appreciation, in which the value of their shares rises over time. Shareholder rights and privileges may differ depending on the state’s law the company charter or bylaws.

In general there are two kinds of shareholders: common stockholders (common stock) and preferred share holders. Common shareholders are the largest in number and are entitled to vote at shareholder meetings. They can review reports and take part in decision-making. The shareholders who are preferred get preferential dividends and have priority over ordinary shares in liquidation but only after creditors have been paid.

The term “shareholder” can be used to refer to an individual who owns bonds or debentures issued by the company, which are debt instruments that grant investors the right to a specified rate of return on their investment. The investors are not usually directly involved in the running of the company, however their interests are represented in the body that governs the business.

Investors who invest in shares of a company with a strategic objective in mind, for instance the acquisition of new markets or technologies, are known as strategic shareholders. This kind of shareholder is an essential part of a family firm as they know the scope of the project and its possibilities, and are willing to take on risk for the return on their investment.