Shareholder

A Shareholder plays a central role in the world of companies and financial markets. As a shareholder in a company, they not only contribute to the capital base, but also influence strategic decisions that determine the course of the company. This role brings with it both opportunities and responsibilities that are essential to understanding the dynamic relationships between companies and their shareholders. In this article, we take a closer look at the importance and influence of a Shareholder to gain a better understanding of their function in the economic system.

Shareholder definition: What is a shareholder?

A shareholder is a person or company that holds shares in a public limited company. These shares represent a part of the ownership of the company, which gives the shareholder certain rights, such as the right to dividends, the right to vote at general meetings and the right to a share of the company's assets in the event of its dissolution. Shareholders can be either private individuals or institutional investors and, depending on the number of shares held, have a greater or lesser influence on company decisions.

How do you become a Shareholder?

To become a Shareholder, you usually follow these steps:

Opening a securities account: First you need a securities account, which you open with a bank, an online broker or a specialized platform. This securities account serves as an account for storing and managing the shares.
Selecting shares: You then decide which companies you want to invest in. This decision should be based on a careful analysis, taking into account the economic situation, the business model and the future prospects of the company.
Buying shares: Once you have decided on specific shares, you buy them via the stock exchange or over-the-counter trading platforms. The purchase is usually made by means of a buy order, in which the desired number of shares is purchased at a certain price or at the current market price.
Monitoring and management: After the purchase, the shares are held in a custody account and their performance can be monitored. As a Shareholder, you receive regular information from the company, such as annual reports, and can participate in general meetings.

Through this process, you become a co-owner of the company and potentially benefit from its economic success.

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Advantages & disadvantages of being a shareholder

The following table provides an overview of the main advantages and disadvantages associated with owning shares and being a Shareholder.

Advantages	Disadvantages
Participation in company profits: Shareholders receive dividends when the company generates profits and distributes them.	Share price risk: The value of the shares can fall. Shareholders bear the risk of the share price falling, which can lead to capital losses.
Capital growth: If share prices rise, shareholders benefit from the increase in the value of their shares.	No guaranteed dividends: Dividends are not guaranteed and depend on the company's decision.
Right to have a say: Shareholders can vote on important company decisions at general meetings	Limited influence: Small shareholders often have little influence on company decisions.
Liquidity: Shares can be bought and sold relatively easily on the stock exchange, allowing quick access to capital.	Volatility: Share prices can fluctuate widely, leading to uncertainty.
Diversification: Shares offer an opportunity to diversify your own investment portfolio and thus spread risks.	Risk of loss: In the worst-case scenario, shareholders can lose their entire investment if the company becomes insolvent.
Right to information: Shareholders have the right to be informed about the company's business activities.	Tax burden: Income from shares (dividends, capital gains) is subject to capital gains tax.
Limited liability: Shareholders are only liable for their invested capital and not personally for company debts.	Deposit and transaction costs: There may be costs associated with owning shares, such as custody fees and transaction costs.
Potential for long-term wealth accumulation: Long-term investments in successful companies can provide significant wealth growth	Dependence on company performance: The success of the investment depends heavily on the performance of the company and the general market situation.

What rights does a Shareholder have?

Shareholders have a number of rights to which they are entitled as co-owners of a public limited company. These rights can be divided into two main categories: Participation rights and property rights.

Participation rights of a Shareholder

These rights enable shareholders to actively participate in Corporate Management and decision-making:

Voting rights: Shareholders have the right to vote on important company matters at the Annual General Meeting, such as the election of the Supervisory Board, the discharge of the Management Board and Supervisory Board, capital increases or mergers. In most cases, the principle of “one share, one vote” applies.
Right to participate in the Annual General Meeting: Shareholders have the right to participate in the Annual General Meeting. Here they can find out about the state of the company, ask questions and exercise their voting rights.
Right to information: At the Annual General Meeting, shareholders have the right to request information from the Management Board on all matters relating to the company that are necessary to assess the items on the agenda.
Right of challenge: Shareholders may challenge resolutions of the Annual General Meeting if they believe that they violate the law or the company's Articles of Association or significantly impair their interests.
Right to special audit: Under certain conditions, shareholders can request a special audit by an independent auditor if there is a suspicion of mismanagement or irregularities.

Shareholder's property rights

These rights relate to the Shareholder's financial interest in the company:

Dividend rights: shareholders are entitled to a share of the company's profits, which are distributed in the form of dividends if the Annual General Meeting so decides.
Subscription right: In the event of capital increases, shareholders have the right to acquire new shares at a fixed price before other investors in order to maintain their shareholding quota.
Right to liquidation proceeds: In the event of the dissolution or liquidation of the company, shareholders are entitled to a share of the remaining assets after settlement of all debts and liabilities.
Right to sell freely: Shareholders may sell their shares at any time on or off the stock exchange, provided there are no contractual restrictions.

These rights enable shareholders to participate in the financial performance of a company as well as to exert influence on Corporate Management.

What is liquidity in this context? How exactly does the dividend work?

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Important terms relating to the Shareholder

Shareholder terms

Term	Explanation
Share	A security that represents a share in the equity of a public limited company and confers certain rights on the holder.
Dividend	The portion of profits that a public limited company distributes to its shareholders, usually at regular intervals (e.g. annually).
Voting rights	The right of a Shareholder to vote at the Annual General Meeting and thus influence important company decisions.
Annual General Meeting	An annual meeting of the shareholders of a public limited company at which important company issues are voted on.
Stock exchange	An organized market on which securities such as shares are traded.
Securities account	An account at a bank or broker in which securities such as shares are held and managed.
Market value	The current price at which a share is traded on the stock exchange.
Capital increase	A measure in which a stock corporation issues new shares to raise additional equity.
Subscription right	The right of an existing Shareholder to acquire new shares preferentially in the event of a capital increase in order to maintain their shareholding quota.
Registered share	A share in which the shareholder's name is entered in the company's share register.
Bearer share	A share that is made out to the bearer and for which the shareholder's name is not entered in the share register.
Market price	The current market price of a share resulting from supply and demand on the stock exchange.
Free float	The proportion of a company's shares held by many smaller shareholders and freely traded on the stock exchange.
Supervisory Board	A body elected by shareholders to oversee the management of a public limited company.
Preference share	A share that gives the holder preferential rights, such as a higher dividend, but is often without voting rights.
Book value	The value of the equity of a stock corporation attributable to the individual share.
Free float	The portion of a company's shares that can be freely traded on the market without being held by major shareholders.
Takeover bid	An offer made to the shareholders of a company to sell their shares at a certain price, often as part of a takeover.
Insider trading	The illegal buying or selling of shares based on non-public, material information about the company.
Stock index	A statistical average that tracks the performance of a group of stocks, such as the DAX or S&P 500.

These concepts are central to understanding the role and rights of a Shareholder and how stock markets and corporations work.

What obligations does a Shareholder have?

Shareholders not only have rights, but also certain obligations that they must fulfill as part of their participation in a public limited company. Here are the most important obligations of a shareholder:

Payment obligation
- Payment of the capital contribution: Shareholders are obliged to pay the purchase price for the shares they have acquired in full. This contribution represents the equity used to finance the company.
Duty of loyalty
- Safeguarding the interests of the company: Shareholders must safeguard the interests of the company and may not abuse their rights to cause damage to the company. This also includes ensuring that they do not breach their duty of loyalty to the company in their conduct.
Duty to disclose shareholdings
- Duty to disclose significant shareholdings: If a Shareholder exceeds certain thresholds (e.g. 3%, 5%, 10% of shares), they must report this to the company and the supervisory authorities. This disclosure obligation is intended to create transparency and prevent uncontrolled influence.
Duty of confidentiality
- Confidentiality: Shareholders, especially those with access to internal information (e.g. major shareholders or members of the Supervisory Board), are obliged not to disclose confidential information to third parties without authorization or to use it for their own benefit.
Duty to participate
- Attendance at the Annual General Meeting: While shareholders are not obliged to attend the Annual General Meeting, it is considered good practice, especially when important decisions affecting their interests are pending. Exercising voting rights is also part of what is expected of active shareholders.
Tax liability
- Taxation of profits: Shareholders must declare any capital gains they earn, such as dividends or profits from the sale of shares, in their tax return and pay any tax due on them.
Participation in capital measures
- Acting on capital increases: If the company carries out a capital increase, shareholders must decide whether to exercise or waive their subscription rights. This decision may affect their percentage share in the company.
Obligation to comply with the articles of association and laws
- Compliance with company regulations: Shareholders must comply with the company's articles of association and applicable laws. This also includes complying with the resolutions of the Annual General Meeting, even if they do not agree with them.

These obligations ensure that shareholders participate in the company in a responsible manner and that the stability and proper functioning of the company are maintained.

What is the equity ratio in this context?

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To the article on equity ratio

Types of shareholders

Shareholders can be differentiated according to various criteria. Here are some common types of shareholders:

Overview: Criteria for distinguishing shareholders

The following diagram provides an overview of the criteria for distinguishing between shareholders.

Explanation: Criteria for distinguishing shareholders

These different types of shareholders have different interests, rights and obligations that strongly influence the dynamics and structure of shareholder meetings and corporate decisions.

By type of shareholding

Small shareholders: These only hold a small proportion of a company's total share capital. As a rule, they have little influence on company decisions.
Major shareholders: These own a significant proportion of a company's share capital and can exert considerable influence on company policy. These are often institutional investors or wealthy private individuals.

According to the type of shares

Bearer shareholders: Hold bearer shares where the shareholder's name is not registered. The rights belong to the person who owns the share.
Registered shareholders: Hold registered shares where the shareholder's name is entered in the company's share register. This type of Shareholder is often subject to certain reporting obligations.

According to the duration of the shareholding

Long-term shareholders: These shareholders hold their shares for a longer period of time, often with the aim of benefiting from long-term increases in value and dividends.
Short-term shareholders: These shareholders only hold their shares for short periods of time and are often interested in profiting from short-term price gains. This group is often referred to as traders.

According to the shareholder's domicile

Domestic shareholders: These shareholders are resident or domiciled in the same country as the company whose shares they hold.
Foreign shareholders: These shareholders are resident or domiciled in a different country from the company whose shares they hold. Their investments are often subject to the laws and regulations of the country in which the company is domiciled.

According to the type of investor

Retail investors: Individuals who buy and hold shares, often as part of their personal financial strategy.
Institutional investors: Companies and organizations such as investment funds, pension funds, insurance companies and banks that hold large amounts of shares and can often exert considerable influence over companies.

According to the influence on the company

Voting shareholders: These shareholders own shares that carry voting rights and can therefore participate in votes on company decisions.
Silent shareholders: These shareholders have no voting rights and often only participate in the economic returns, but not in the decision-making processes.

Difference between Shareholder and Partner

This table summarizes the most important differences and provides an overview of the various rights, obligations and opportunities associated with the respective roles.

Characteristic	Shareholder	Partner
Type of participation	Owner of shares in a stock corporation	Owner of shares in a company, e.g. GmbH in Germany or partnership
Legal form of the company	In Germany: Aktiengesellschaft (AG), Kommanditgesellschaft auf Aktien (KGaA)	Gesellschaft mit beschränkter Haftung (GmbH), Offene Handelsgesellschaft (OHG), Kommanditgesellschaft (KG), etc.
Proof of ownership	Through share certificates or entries in the electronic securities account	Through shareholders' agreement and entry in the commercial register
Voting rights	Dependent on the number of shares held, usually according to the principle of “one share, one vote”	Dependent on the amount of the capital share or contractual provisions
Profit participation	Entitlement to dividends, dependent on company profits and resolutions of the Annual General Meeting	Entitlement to a share of profits in accordance with the shareholders' agreement or statutory regulations
Liability	Limited to the amount of the capital contribution, no personal liability	Liability depends on the legal form, often limited to the capital contribution, in some forms (e.g. OHG) also personal liability
Sale of shares	Shares can usually be freely traded on the stock exchange	Shares can often only be sold with the consent of the other shareholders or in accordance with certain contractual provisions
Influence on Corporate Management	Usually indirect via the election of the Supervisory Board and voting at the Annual General Meeting	Frequently direct influence, especially in small or medium-sized companies, often through participation in management
Annual general meeting / shareholders' meeting	Participation in the annual general meeting, where important company decisions are voted on	Participation in the shareholders' meeting, where important decisions are also voted on, often more say

FAQ

What do I have to do as a Shareholder in the event of a capital increase?

As a Shareholder, you should check whether you wish to exercise your subscription rights in the event of a capital increase in order to acquire new shares and thus maintain your participation quota. Otherwise, you could sell your subscription rights or let them lapse, which could, however, reduce your shareholding in the company.

Who is the richest Shareholder in the world?

The richest shareholder in the world is currently Elon Musk, who holds large stakes in Tesla and SpaceX. Elon Musk has an estimated fortune of over 230 billion US dollars, with the majority of his wealth coming from his shareholdings in Tesla and SpaceX.

Is a Shareholder an Investor?

Yes, a Shareholder is an investor as they invest capital in a company by buying shares in the company.

How many subscription rights does a Shareholder receive?

The number of subscription rights a Shareholder receives depends on the number of shares held and the subscription ratio for the capital increase. If a company sets a subscription ratio of 4:1 for a capital increase, this means that shareholders receive 1 subscription right for every 4 shares already held. For example, if a Shareholder has 100 shares, they will receive 25 subscription rights. If the ratio is 10:1, the shareholder receives 10 subscription rights for 100 shares.

Where can a Shareholder exercise his participation rights in the AG?

A Shareholder can exercise his participation rights in the AG at the Annual General Meeting. Shareholders can attend the Annual General Meeting, either in person or by proxy, and vote on important company decisions. They receive information in advance and can ask questions or submit motions.