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A shareholder is someone or a corporation that holds part ownership in a business by purchasing shares on the stock exchange. Shareholders are rewarded when the company succeeds in boosting its stock value and financial earnings in the form of dividends. Shareholders don’t have to personally bear the liabilities or debts of the company, however they are taking on an investment risk when they invest.

Shareholders can be classified into two broad categories: those holding common shares, and those who have preferred shares. Companies can also break them down further into class with different rights that are associated with each class shares.

Common shares are often distributed to employees as a part of their compensation and they are also entitled to voting rights on issues which affect the business as well as also receiving dividends from the company’s earnings. They are second in line to preference shareholders in relation to the rights to assets in the event of the event of liquidation.

Preferred shareholders, on the other hand, are not entitled to participate in the management decisions of the company. They also do not have a fixed dividend, and the rate can change in accordance with the performance of the business in a particular year. Additionally the dividends are paid prior to the common shares are paid out in a liquidation of the company. Shareholders can have other rights like the possibility of receiving a preferential or special dividend, or no dividend.