Also known as: stockholders · shareholder
Written by attorneys · grounded in primary & secondary sources — see below
A person who owns shares in a corporation. Ownership confers rights to participate in corporate governance, receive distributions when declared, and pursue remedies such as derivative actions when corporate fiduciaries breach duties.
Simone Sanders formed Summit Bank and treated its accounts as her personal checking account. She paid personal expenses directly from corporate funds, kept no board minutes, and left the company undercapitalized. When a creditor sued, the court examined the totality of circumstances and disregarded the corporate form because Sanders had used the entity merely as a facade.
Spencer Silver created Silverline Industries as a shell with minimal capital and no corporate records. He used the entity to contract with suppliers while personally retaining all profits. After the company defaulted, creditors satisfied the two-prong test and reached Silver's personal assets because the corporation was merely his alter ego.
Select any source to read its text and confirm it supports the definition.
Sabrina Shah, a stockholder in a Delaware corporation, filed a derivative action in Delaware court against nonresident directors. The court analyzed whether the directors' status alone supplied sufficient contacts with Delaware to support personal jurisdiction over them in the stockholder's suit.
Serena Soto, a stockholder, brought a class action alleging misleading proxy statements. After an SEC suit produced a finding that the statements were false, the court considered whether that finding could bind the defendants in Soto's later stockholder class action.
Samuel Soto, a stockholder harmed by misleading corporate disclosures, sought damages. The court weighed the availability of a damages remedy for stockholders against the need for a damages remedy in a separate constitutional context.
Selena Singh received a corporate communication from her company regarding political activity. The court examined whether the communication fell within the statutory exclusion for messages sent by a corporation to its stockholders.
A stockholder must have been a shareholder at the time of the complained-of transaction or have received the shares by operation of law. The complaint must also allege with particularity that a demand was made or that demand would have been futile.
Supporting sources
Courts apply a totality-of-the-circumstances test that considers inadequate capitalization, failure to observe formalities, siphoning of funds, and whether the corporation was merely a facade for the dominant stockholder. A two-prong alter-ego plus injustice test may also be used.
Supporting sources
The local law of the state of incorporation governs a stockholder's rights to vote, receive dividends, participate in governance, and receive distributions on dissolution, unless another state has a more significant relationship to the issue.
Supporting sources
…reasoning establishes only that it is appropriate for Delaware law to govern the obligations of appellants to Greyhound and its stockholders. It does not demonstrate that appellants have "purposefully avail[ed themselves] of the privilege of conducting activities within the forum State," Hanson v. Denckla, supra , at 253, in…