What is a shareholder?

Shareholders often provide valuable investment in a company. But is there more to their role?

Separation of powers

Shareholders and directors are often the same people, especially in smaller companies. Even so, shareholders have a distinct role in the company and rights that go with their shareholding. First and foremost, shareholders create the company and invest in it. To protect their investment, they make the most significant decisions and can hold the directors to account. This oversight role is vital to ensure that directors act in the company’s best interests, rather than their own.

Tailor made

Companies are able to create different share rights and tailor their own articles to suit their circumstances. For example, they can create separate share classes that grant different rights to different groups of shareholders. Many companies will stick with their original subscribers, perhaps issuing them additional shares as they invest in the company, while others may grow quite complicated share structures. This checklist provides an overview of shareholders, their rights and liabilities.