What is a shareholder?
Definition of a shareholder
A shareholder is a person who owns shares in a limited company.
A limited company is a separate legal entity in its own right that can own assets and incur debts.
The company itself needs to be owned by one or more people. Ownership of a company is given by ownership of shares. If a company has only one shareholder, that individual will own all the company’s shares.
Anyone can buy shares in a public limited company ('Plc'), and these shares can be bought and sold on the open market. The shares in a private limited company (whose name will end in 'Ltd' or 'Limited') cannot be openly bought and sold.
A company may pay dividends on its shares if it has enough profit. The shareholders receive dividends based on how many shares they own.
Example of a shareholder:
A company with two shareholders, one who owns 75 shares and the other 25 shares, pays out a dividend of £1,000. The first shareholder will receive £750, the second £250.
Frequently Asked Questions
Is a shareholder the same as a director?
No, though they may be the same individuals, particularly in a small or close company. Shareholders own the company, while directors have the legal responsibility for running it.
