Shareholder

Shareholders (or Stockholders) are owners of equity of a corporation. In startup companies, shareholders typically consist of the founders, early contractors and service providers, friends and family, angel investors, accelerators/incubators and seed investment funds. A person becomes a shareholder by buying shares of a company. Shareholders are entitled to vote on certain corporate matters. Shareholders elect the board of directors that are in charge of the company’s officers, business practices and performance. Shareholders also are empowered to approve certain major corporate actions such as a merger or acquisition. Shareholders typically meet once a year at an annual shareholders’ meetings. Under the law of many states, major shareholders are permitted access to the company’s books and records. Minority shareholders are often granted special protections under law and shareholders that do not approve of major corporate actions can exercise dissenter’s rights and receive a fair market value payment for their shares. Shareholders play a passive role in the day-to-day management of a corporation, owe limited duties to the corporation and are not personally responsible for the liabilities of the corporation except in extreme circumstances. In comparison, the board of directors and officers of a corporation are in charge of managing the day-to-day operations and must comply with statutory duties.