Protecting the rights of shareholders is not an easy matter that cannot be dealt with in the absence of a professional. Currently, such activities as an investment are gaining popularity.
The Concept of Majority Shareholder
There is no term “majority shareholder” in the law. But what is a majority shareholder? In business practice, a majority shareholder is an individual or legal entity holding the largest number of shares. As the owner of a larger stake in the business, the majority shareholder has the main influence on the management of the joint-stock company. For example, he alone can vote for the decision he needs and “outweigh” the total number of votes of other shareholders, even if all of them are against the controversial decision.
An individual or legal entity that owns more than 50% of the total number of outstanding shares of the company. The majority shareholder is often the founder of the company or, in the case of a long-term established business, a descendant of the founders. Due to the control of more than half of the voting shares in the company, the main shareholder has a significant influence on the course of business and the strategic direction of the company.
If one of the co-owners has a relative majority, i.e. has a larger stake than other co-owners, but does not own sole control, we will call it the Majoritarian. In such a business, he is a leader recognized by other co-owners, but in order to control, he will still have to enter into an alliance with one of them. This is a special case of a partner company. Note that a high level of capital concentration is characteristic not only of our country. That is, such a model is not unique, and the experience of large companies testifies to its sufficient effectiveness.
What Are the Main Majority Shareholder Benefits?
Majority shareholder – the owner of the predominant block of shares, who has the right to participate in the management of the joint-stock company. The exact size of the package depends on the specific case and the share of shares held by other shareholders; the lower bar is usually the percentage that allows you to exercise at least some active rights, for example, to guarantee to elect your candidates to the board of directors of the company.
In fact, there are still many businesses where majority shareholders are still hesitant over whether to squeeze out. Such indecision may not least arise due to the prospect of litigation with minority shareholders in courts, which, although in the process of reforming, still often make unpredictable or biased decisions. The main majority shareholder benefits are:
- Leads to building confidence in the stock market.
- Protects property rights.
- Eliminates risk for companies by making smarter decisions.
- Creates a lot of documentation without providing tangible value.
- Limits payment for services rendered by the majority shareholder to subsidiaries.
Indeed, for some majority shareholders, the squeeze-out was not limited to stock buyback procedures but was continued – disputes with minority shareholders in courts. Minority shareholders asked the courts to block the squeeze-out until the procedure was completed and the shares were not transferred to the majority shareholder’s account, as well as to cancel or change the squeeze-out results by returning the shares to the minority shareholder’s account or by paying fair, in the opinion of the minority shareholder, compensation for the redeemed shares.