Shareholders can be companies or individuals who invest money in a company by purchasing shares. The performance of the company and its ability pay dividends, determines if they make either a profit or lose. They also gain from capital appreciation, in which the value of their shares grows over time. Shareholders’ rights and privileges are varying in accordance with state law and a company’s charter, or bylaws.

There are generally two types of shareholders in a firm such as common stockholders and preferred share holders. Common shareholders are the largest in number and are entitled to vote at shareholder meetings. They can participate in the decision-making process as well as scrutinize the reports. Preferred shareholders can get preferential dividends and have priority over ordinary shares in liquidation, but only after creditors have been paid.

The term «shareholders» could also refer to those who hold bonds and debentures issued by a company. These are debt instruments which give investors a certain amount of return. They are typically not involved in the daily operations of the company, however their interests are represented in the governance body.

Strategic shareholders are investors who buy shares in a company to achieve a specific strategic goal, such as acquiring new technologies or markets. This type of shareholder plays a vital role in a family-owned company, since they understand the scope of the project and its potential and are able to take risks for the benefit of their investment.