Shareholders: Understanding, Functions,Type, and Rights

 

Investing is a lot of activity in recent years. This is because the investment provides a profit that satisfies the culprit. There are even some people who make this activity as their full-time job to earn money. There are various forms of investment, one of the most well-known being stocks. Those who own shares in a company are commonly referred to as shareholders. Shareholders will benefit from dividends provided by the company. If you are interested in becoming a stock owner in a company, then you may want to read this article from Qoala further to be able to understand more about the meaning of this term and various other important info related to this.

What are shareholders?
Shareholders are a word that is more inclined towards the business world compared to stock investing. This is because stock investors and stock owners are different things. A shareholder is a person who gets ownership of a part of the company or buys shares. There are three types of stockholders.
The first shareholder is referred to as a shareholder who is an individual, company, or institution that has at least one share in the company. The second type is the majority shareholders in which they own and have control of more than 50% of a company's shares.
The latter type is a minority shareholder whose shareholding is less than 50%. Usually, an old company has a shareholder who is a descendant of the company's founder. But now it is quite different because shares can be owned by the CEO or Co-founder of the company even though they do not have family relationships. The majority shareholder owns at least more than half of the company's voting rights and can greatly influence the decisions taken by the company. For example, such as the replacement of a CEO or a member of the company's board.

Difference between Shareholders and Investors
Shareholders and investors look alike, but are actually different. Both have share assets in a company, but the obligations, rights, and duties of the two are completely different. Investors do not have to be shareholders, but the shareholder is certainly one of the investors, who because they both buy stock assets from the company.
However, the biggest difference is in the time of the purchase of the shares. The majority of those who are called shareholders are people who have invested money at the beginning of the company's establishment. A shareholder is a type of investor who is a stakeholder in one and or more of one business.
Investor is a very broad term, because people who have invested in deposit financial instruments and/or bank accounts are also known as investors. Investors are also called for people who have many types of assets other than stocks and also public limited company debentures.

Shareholder Function
Agency theory provides an overview of the relationship between management and shareholders. In the theory of agency, the management and shareholders of the company have a separate role. Shareholders have a role as principals that the company has. While management has a role as an agent that manages the company.
The management and shareholders collaborate in running the company. Shareholders as employers and management as workers. All actions taken by the management must be reported to the shareholder. The agency relationship that occurs between the two is one form of business governance.
The management, especially in financial management, aims to make the company get the maximum value. The goal of this one, in essence, is the same as maximizing wealth for shareholders. The purpose of maximizing the value of the company here is to maximize the value of the share price of the shareholders.

Shareholder Conflict
Shareholders can experience conflicts with management, especially the financial management department. The source of the conflict is both on the topic of dividend policy. The ability of a business entity to generate profits and also the continuity of the business wheel in the future can be represented through total dividends that can be paid in cash or conversion in shares.
Retained earnings can exist when a business entity makes a decision not to distribute profits to shareholders. The existence of retained earnings will benefit the management. The reason for this is because retained earnings can be an internal source of corporate funding that can be used for expansion costs. By using this profit eating capital costs will look frugal.
The wishes of the management are inversely proportional to those of shareholders. Shareholders want cash flow in the form of dividend distributions. The distribution of dividends is the goal of every investor. Delays in dividend distribution by management can lead to a bad view from investors. The shareholders will assess that the financial condition of the company is in a bad state.

Types of Shareholders
Stock owners are not only formed from one type, there are several types of shareholders that you should know. The differences owned by these types of shareholders will affect the authority and profits that will be obtained by the holder only.
If you want to have the ability to determine company decisions, then there are certain stocks that you can choose to make investments. If you want to get a larger dividend percentage, then you also have to choose a certain stock in becoming an investor. For more information about the type of shareholders, below has Qoala provide 3 types of shareholders and their understanding to add to your insights.
1. Shareholder
Shareholders are also commonly referred to as shareholders. This shareholder is an individual company or institution that owns at least 1 share of the company. Shareholders are also part of the owner of the company so they will benefit when the company is successful.
This profit comes in the form of an increase in the valuation of the stock or you dividend which is a financial gain. If the company loses, then the stock price will fall and shareholders will lose their money.
A decline in the value of the portfolio is also very likely to occur. Usually a single shareholder is referred to as the majority shareholder because it owns and has control over more than 50% of the existing shares in the company.
There is another term minority shareholder for those who own shares below 50%. Usually the majority shareholder is the founder of a company where the owner is a descendant of the founder of the company. It is commonly found in companies that are old or have been built for several decades.
Typically the majority shareholders will control more than half of the company's voting rights so that they can influence the company's decisions over key operational activities, such as replacing the CEO or board members. This is why many companies are trying to avoid having a majority owner in their company. The owner of the company's shares will usually also have no personal responsibility for the company's debts and other corporate liabilities so that if the company goes bankrupt, creditors cannot withdraw the shareholders' personal assets.
2. Majority shareholder
The majority shareholder is a shareholder who can exercise oversight over a company where they must own at least more than 50% of the shares to do this. Majority shareholders are commonly referred to as majority stockholders. Majority stockholders can be formed from minority shareholders who are merged to reach more than 50% but this only applies to companies that have entered the stock exchange.
3. Minority shareholders
Minority shareholders are those who own shares with a total of less than 50% of the number of shares in a company. Minority shareholders have considerable power in determining a company's decisions because of their limited voting rights. But as we discussed above, minority shareholders can combine their strengths so that they can become majority shareholders after the number of these combined shares reaches more than 50%.
But only companies that have entered the stock exchange can do this policy to their minority shareholders. This is because companies that enter the stock exchange, the shares are widely purchased by individuals where they buy them in small amounts so that the majority shareholders cannot be formed.

Overview of the General Meeting of Shareholders (GMS)
You may have heard the term general meeting of shareholders which is an annual activity that is commonly done by a company. The common ground used by this general meeting of shareholders is law number 40 of 2007 concerning limited liability companies. In this law it is mentioned that the GMS is a company that has the right not to give it to the board of directors or board of commissioners in accordance with the limits set in the existing laws and articles of association.
Then the GMS was discussed further in the Limited Liability Company Act VI article 75 to 91. In the limited liability company law article 75 paragraph 2 mentioned that at the GMS forum shareholders have the right to get information related to the company from the board of directors or board of commissioners as long as the questionable matter is directly related to the core of the meeting and does not conflict with the interests owned by the company.
The limited liability company law article 78 states that the GMS consists of annual GMS and other GMS. The annual GMS must be a meeting held within a period of no later than six months after the end of the financial year. At the annual GMS, all documents on the company's annual report referred to in article 66 paragraph 2 shall be submitted.
Gms can be held again in accordance with the needs to meet the interests of the company. In the Limited Liability Company Law article 66 paragraphs 1 and 2, the board of directors will submit an annual report at the GMS after being examined by the board of commissioners for no later than six months after the expiration of the company's financial year. The annual report in paragraph 1 shall have at least some of the following.
Financial statements consist of at least the balance sheet at the end of the new and past financial year for comparison with the previous financial year, income statement in the financial year, cash flow statement, notes on financial statements and statements of changes in equity.

Report on the company's activities
Report on the implementation of social and environmental responsibility
Details of problems that arise during the financial year occur that affect the company's activities.
Reports on supervisory duties that have been carried out by the board of commissioners in the new and past financial years.
Name of board of commissioners and member of the board of directors.
Salaries and benefits for members of the board of directors as well as salaries or honors and benefits for members of the company's board of commissioners in the new year and past.
That is the explanation that Qoala can give regarding the GMS. From this explanation, you can conclude that this meeting is a place for shareholders to express the voice they have. If the opinion is approved and made a mutual agreement then this should be used as a reference for the company when determining future strategies. Gms is a determinant for the sustainability of the company in the future. 

Shareholder Rights
The rights of shareholders are already in the law on limited liability companies article 52 paragraph 1. In this law understand will give some rights to the owner. The rights owned by shareholders are their ability to vote and be present at the GMS, get dividend payments and the remaining wealth of the company, and exercise various other rights that have been determined by law.
This right will apply to shareholders after their name is registered as a shareholder in a company. The rights obtained by the owner of the shares from each year is something that cannot be shared. Rights can be owned by more than one person at a time if the owner appoints 1 person as a joint representative to become the owner of the shares.

Shareholder Liability
Not only get the rights but shareholders also have obligations that they have to do. Under the limited liability company law article 3 paragraph 1, the owners of the company's shares have no personal responsibility for the bonds they make under the name of the company and are not responsible for losses owned by the company exceeding the shares they own. In the company's law article 3 paragraph 1 explained also some provisions that make paragraph 1 does not apply. The things that make this article can not apply are as follows.
The Company does not meet the requirements or has not met the requirements as a legal entity.
Shareholders seek to utilize the company for personal interests either directly or indirectly.
The shareholders also participated in illegal acts committed by the company.
The owner of the shares conducts illegal activities either directly or indirectly with the company's wealth so that the company's wealth cannot pay off the obligations that must be paid by the company.
That's some information about stock owners that Qoala can provide to add to your insight. If you want to be an investor, let alone a full-time investor, then you must really understand the difference between all types of shareholders in order for you to get what you need. Being a shareholder can not only get profits or rights, but also have obligations that must be fulfilled.
Increasing the number of shares you have in a company is also quite important if your goal is to get as much profit as possible. But you may have to remember that stocks are long-term investments so the profits will not be too large if you only have a small number of shares. Hopefully with this article from Qoala, you can understand the basics about shareholders. Find other interesting reviews of finance &investment topics like learning stocks for beginners.

Share :