Stockholder definition
/What is a Stockholder?
A stockholder is a person or entity that owns shares in a corporation. A stockholder may own the preferred stock or common stock of a corporation (or both). Preferred stock may have special voting rights, dividends, and other features that are not available for common stock. A stockholder is accorded certain rights in respect to the shares held, which most commonly involve voting for members of the corporate board of directors and voting on certain policy issues, as well as receiving any dividends authorized by the board.
A stockholder may acquire shares in the primary market when a company initially issues shares to the investment community, which means that the payee is the issuing corporation. However, most stockholders acquire shares on the secondary market, and so are paying current stockholders to acquire their shares.
Stockholder Payout Priority
A stockholder has the lowest priority for receiving payment in the event of a corporate liquidation, with secured and general creditors being entitled to full payment before any residual amounts are paid out to stockholders. A stockholder who owns the issuer’s preferred stock will receive payment before any stockholders who own the firm’s common stock.
This can mean that shareholder investments may be entirely lost in the event of a corporate liquidation.
Terms Similar to Stockholder
A stockholder is also known as a shareholder.
Related AccountingTools Courses
Types of Stockholders
There are many types of stockholders, which fall into the following categories:
Individual investors
Institutional investors, such as mutual funds, pension funds, and hedge funds
Corporations
Governments and sovereign wealth funds
Private equity and venture capital firms
Employee ownership, such as employee stock ownership plans
Non-profit entities
Trusts and estates
Custodians and nominees
Each of these entities may have different investment goals, ranging from long-term growth to short-term gains or strategic business advantages.