Legal Terms

shareholder

An owner of a corporation whose ownership interest is represented by shares of stock in the corporation. A shareholder -- also called a stockholder -- has rights conferred by state law, by the bylaws of the corporation and, if one has been adopted, by a shareholder' s agreement (often called a buy-sell agreement). These include the right to be notified of annual shareholders' meetings, to elect directors and to receive an appropriate share of any dividends. In large corporations, shareholders are usually investors whose shares are held in the name of their broker. On the other hand, in incorporated small businesses, owners often wear many hats -- shareholder, director, officer and employee -- with the result that distinctions between these legal categories become fuzzy.