Shareholders: Who Are They and What Do They Do?

Reviewed by Neil AinsworthLast updated: February 17, 2026 3:11 pm

In this article:

The Role and Rights of Shareholders
Types of Shareholders
How Shareholders Impact Corporate Governance
Getting Regulated Financial Advice

Shareholders (often called stockholders) are individuals or organisations that own one or more shares in a company. They do not own the company’s assets, but their shareholding gives them certain rights and a potential financial interest in the company’s success. Understanding who shareholders are and what they do is useful for entrepreneurs, prospective investors and anyone working with companies.

The Role and Rights of Shareholders

Shareholder rights are set out in a company’s articles of association and in law (notably the Companies Act 2006¹). For listed companies, the UK Listing Rules² and the UK Corporate Governance Code³ also apply. Shareholders may benefit from dividends and capital growth, and they can influence how the company is run through specific rights.

1. Voting Power

Shareholders can vote at general meetings on matters such as electing or re‑electing directors, approving significant transactions and changes to the company’s constitution. In the UK, final dividends are approved by shareholders on the board’s recommendation, while interim dividends are set by the board. Shareholder votes can materially influence a company’s direction.

Annual General Meetings (AGMs)

Most routine voting takes place at the Annual General Meeting (AGM). Depending on a company’s articles, shareholders may attend and vote in person, appoint a proxy, or participate electronically in hybrid/virtual meetings. Many companies now facilitate electronic voting to widen participation.

2. Dividends

Dividends are distributions of profit decided by the board (interim) or recommended by the board for shareholder approval (final). Payments are not guaranteed and depend on profitability, cash flow, investment needs and the company’s stated dividend policy. Dividend levels vary between companies and sectors, and can change over time.

Impact of Economic Changes on Dividends

Macroeconomic conditions influence dividend policies. Higher financing costs, weaker earnings, or the need to preserve cash may lead companies to reduce, defer, or suspend dividends; conversely, stronger trading or excess cash may support increases or share buybacks. Boards balance shareholder returns against funding future growth and maintaining a resilient balance sheet.

3. Information Rights

Shareholders are entitled to certain information, including notice of meetings and access to the annual report and accounts. Listed companies also publish market announcements via a regulatory news service. Quarterly reporting is not mandatory in the UK, although some companies issue trading updates in between half‑year and full‑year results.

Statutory Reports

Under UK rules, publicly listed companies must publish annual and half‑yearly financial reports and make them available to shareholders on equal terms. These disclosures support informed decision‑making and market transparency.

4. Right to Sue for Wrongdoing

If shareholders believe the company is being mismanaged or that their rights have been infringed, legal routes may be available. In the UK, these can include derivative claims on behalf of the company (Companies Act 2006, ss. 260–263), unfair prejudice petitions by shareholders (s. 994), and, where appropriate, group litigation procedures. The best course of action depends on the circumstances, and specialist legal advice is advisable.

Recent Legal Precedents

In recent years, UK shareholder actions have challenged issues such as inadequate disclosures and contested corporate transactions, demonstrating that legal remedies can hold boards to account. Outcomes vary case by case and are fact‑specific.

Types of Shareholders

Different shareholder categories help explain how influence is distributed and how decisions are made.

Ordinary vs Preference Shareholders

In the UK, most equity is held as ordinary shares, which usually carry voting rights and may receive dividends. Preference shares typically carry a fixed dividend and priority over ordinary shares on distributions, but often have limited or no voting rights. Some preference shares are convertible into ordinary shares under specified terms.

Dividend Preferences

Preference dividends are generally fixed and paid ahead of ordinary dividends, making the income stream more predictable but with limited participation in profit growth. Actual yields vary by issuer, market conditions and the terms of the shares.

Institutional vs. Individual Shareholders

Institutions such as pension funds, asset managers and insurers often hold large stakes and can exert significant influence through research-driven engagement and voting. Individual (retail) shareholders invest for personal portfolios; while each may hold a smaller stake, together they can still influence outcomes through aggregated votes.

Role of Institutional Investors in Corporate Governance

Institutional investors frequently engage with boards on strategy, capital allocation, executive pay, and environmental, social and governance (ESG) matters. The UK Stewardship Code⁴ encourages such active ownership and transparency around voting and engagement.

Engagement and Voting Trends

Shareholder engagement and activism have grown in recent years. Proposals related to governance, remuneration and ESG are attracting greater scrutiny, though support levels vary by company and issue.

By understanding these distinctions, investors can better appreciate the dynamics of corporate governance and how different shareholder groups may influence company policies and strategy.

How Shareholders Impact Corporate Governance

Shareholders influence governance primarily through electing directors and voting on key matters. Directors must promote the success of the company for the benefit of its members as a whole (Companies Act 2006, s.172), having regard to wider stakeholders. Effective alignment between the board and shareholders supports accountability and long‑term performance.

Enhanced Oversight and Strategic Influence

Beyond electing directors, shareholders may approve major transactions, significant share issuances and changes to the company’s constitution, as required under company law and, for listed companies, the Listing Rules. Constructive engagement helps ensure strategy and capital allocation reflect long‑term objectives and responsible business practices.

Accountability in Financial Reporting

Shareholders assess performance through annual and half‑yearly reports, audited accounts and regulatory announcements. This scrutiny promotes transparency and robust internal controls, and helps hold management to account.

Role in Risk Management

Through board elections and engagement, shareholders can influence the company’s risk appetite and oversight of principal risks, helping to avoid excessive risk‑taking while not unduly constraining growth.

Impact on Corporate Sustainability

Many investors now prioritise sustainability. Shareholder engagement has encouraged companies to improve climate and other ESG disclosures and to link strategy to long‑term environmental and social considerations, consistent with evolving UK reporting expectations.

Overall, active and informed shareholders contribute to a governance framework that balances long‑term value creation with high standards of accountability and responsible conduct.

Getting Regulated Financial Advice

For individual investors, interpreting company documents, understanding voting mechanics and exercising your rights can be challenging. A regulated financial adviser can help you consider options in light of your goals and risk tolerance. This article is for information only and is not personal advice.

Remember that the value of investments can go down as well as up, and you may get back less than you invest. If you are unsure about an investment, seek independent, regulated advice.

FinancialAdvisers.co.uk can connect you with firms that are authorised and regulated by the Financial Conduct Authority (FCA). Any referral does not constitute a recommendation. Always check a firm’s details on the FCA Register before engaging them.

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