Common stock is a class of stock that represents equity ownership in a corporation. Owners of common stock, called shareholders, are entitled to the following rights:
- Voting rights to elect the members of the board of directors. Typically, shareholders may cast one vote per share. However, shareholders may establish deviations from this one-vote-per-share default rule in the corporation’s charter.
- A residual claim on the corporation’s assets and income in the form of dividends. Although shareholders that own common stock are not entitled to receive a periodic payment of dividends, they are entitled to collect them when the corporation’s board of directors declares its payment.
- In the event of liquidation of the corporation, shareholders may have rights to the corporation’s remaining assets, provided that the creditors and owners of preferred stock are repaid first.
[Last updated in December of 2021 by the Wex Definitions Team]
