Majority Shareholder Definition
Majority Shareholder, also known as controlling shareholder, is an individual or a corporation that owns majority of the stock of the company i.e. more than 50% of the stock and therefore enjoys more voting power than other shareholders. These shareholders are is in a position to influence the decisions of the company and can select or replace board of directors.
How Does Majority Shareholders Influence Decision Making?
Since they hold more than 50% of the shares in the company, they are in the position to take decisions in the company. For taking large-scale decisions in any company other than day to day affairs, the approval of the shareholders is required. Thus, whenever any decision is to be taken, the approval of controlling shareholders is to be taken, and they can analyze whether such a decision is beneficial for the company or not. They can help the organization by not approving any such matter which is not in the interest of the company.
Mr. A holds 25% shares in a company and his shareholding is highest in comparison to other shareholders of the company.
In this example, although Mr. A holds the highest number of shares in the company, he still can’t be called as a controlling shareholder since, in order to become one, his shareholding shall be in excess of 50%.
Majority Shareholder vs Minority Shareholder
|Criteria||Majority Shareholder||Minority Shareholder|
|Shareholding||More than 50%||Less than or equal to 50%|
|Role in Decision Making||Major role||Minor role|
|Protection from Unfair Prejudice||Not required since they are in the majority||Required as there is the possibility of their oppression|
|Legal action||They do not require to file a legal case as they are not being oppressed in the organization||They can file a legal case against controlling shareholders if they feel they are being oppressed.|
- The majority shareholder shall disclose to the minority shareholders when they intend to sell the company’s assets to another entity.
- Such shareholders shall not use the secret information available to them in their own advantage only.
- They shall ensure that he doesn’t misuse his position for promoting his personal interests at the cost of the company’s general interest.
- They shall not prevent the minority shareholders of an equal opportunity in the company.
- They are required to act in good faith and honesty.
Majority shareholders enjoy decision making power in the company as major decisions require their approval. Although, they should ensure that they fulfill their fiduciary duties towards the minority shareholders and do not misuse the rights and privileges available to them. If they feel that their rights of equal opportunity in the organization are being suppressed by such shareholders, they may decide to file a legal suit against them.
This has been a guide to Majority Shareholder and its definition. Here we discuss how controlling shareholders affect the decision making of the company along with their features and duties. We also discuss the difference between majority vs minority shareholders. You can learn more from the following articles –