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Simple English definitions for legal terms
stockholder
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A quick definition of stockholder:
A stockholder, also known as a shareholder, is someone who owns a part of a company. They have the right to vote for important decisions, like who is on the board of directors. They also get a share of the company's profits, called dividends. If the company does something wrong, the stockholder can sue them. This is called piercing the veil. It means the stockholder can hold the people in charge responsible for their actions.
A more thorough explanation:
A stockholder, also known as a shareholder, is a person who owns a part of a company by owning stocks. Owning stocks means that the stockholder has invested money in the company and, in return, has the right to receive a portion of the company's profits.
Stockholders have several rights, including:
- The right to vote for board members
- The right to receive interest and dividends from the company
- The right to bring a lawsuit against the corporation or the board members
For example, if a stockholder believes that the board members are not acting in the best interest of the company, they can vote to replace them with new board members. Additionally, if the company is profitable, the stockholder will receive a portion of the profits in the form of dividends.
However, if the board members are negligent or the company is facing issues like thin capitalization, the stockholder could use a lawsuit to hold the board members accountable. For instance, if the board members are not following proper corporate procedures or are committing fraud, the stockholder could bring a lawsuit against them to protect their investment.
Overall, stockholders play an important role in the governance of a company and have the power to influence its direction and hold its leaders accountable.