Depending on the type of stock a shareholder owns, he can have various privileges regarding the corporation. Some of these privileges are:

-       The right to vote – usually on significant matters requiring the approval of the shareholders, like the election of a new board of directors.

-       The right to some profits of the company, in the form of dividends. (link)

-       The right to purchase new shares.

-       The right to the company’s assets (or a share thereof) during a liquidation.

 

The powers that a shareholder is able to exercise are however limited in nature. Although they are able to vote on some of the more significant aspects of the corporation, the general management of the company is left to the board of directors. Shareholders also do not possess the right to use the corporations property and physical assets – the company is a legal person which owns all of its assets. The shareholders are also not liable in any way for the company’s actions. If a company goes bankrupt, its creditors are only able to lay claim to the company’s assets and not those of its shareholders. This in turn means that, during bankruptcy, the shareholders will be paid off last, as the creditors of the company have the first claim to its assets.

 

Not all corporations’ stock is traded on public stock exchanges like the NYSE or NASDAQ. Majority of corporations are not publicly listed and simply issue their stock to private investors, friends or relatives. There are several reasons for this but the two most overriding ones have to do with the owners not wanting to open ownership of their company to the general public, instead wanting to keep it within their circle of acquaintances. The second reason is the relatively high requirements that need to be met in order to list your company on a public stock exchange.

 

Finally buying a company’s stock can be a good form of investment providing you do the necessary research beforehand. You can also choose to invest into mutual funds (link) whose portfolios often include various stocks of different companies.

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Subjects keywords: Stocks, Definition of stocks, Stock exchange, Shares stocks, Shareholders stocks, Corporation stocks, Company stock. All information about Stocks.