Majority Shareholder Vs. Minority Shareholder; Know Your Legal Rights
What is the argument of Majority shareholder vs Minority shareholder rights? Do you have any idea about the legal rights of both types of shareholders? If not, then you need to know these legal rights as soon as possible. You may face legal complications if you are unaware of the rights you have in the company and you happen to be a shareholder in it. Need more elaboration? Don’t worry! We have got you covered!
A majority of companies doing business across the United States and New York have multiple owners or shareholders. It is very rare that all the shareholders have an equal percentage of shares in the company. There will be a shareholder with more than 50% shares of a company and a number of shareholders with less than 50% shares of a company.
You need to know who is termed as the majority shareholder and a minority shareholder in a company and what are their legal rights according to the percentage of shares they hold in a company. We have come up with comprehensive writing to help you in this regard. Read on to know further details:
A person or entity holding more than 50% of shares in a company is termed as a majority shareholder. Such a shareholder holds a considerable amount of influence over the company. This influence becomes more significant if the shares held by such an entity carry voting power. These voting shares allow a shareholder to call and make a vote on various corporate decisions, such as a loan deal, business contract, and the eligibility of a person to become a member of the board of directors.
A person or entity holding less than 50% of shares in a company can be referred to as a minority shareholder. Such a shareholder has a limited amount of influence over a company because of less percentage of shares. The actual percentage of shares held by such an entity determines various rights of a minority shareholder. For instance, an entity with more than 25% shares will have more rights as compared to an entity that holds only 10% of the total shares of a company. We will elaborate on this statement in the coming sections.
Majority Shareholder- Rights and Privileges:
An entity or a person holding the title of a majority shareholder is often the founder of the company. If the business is established for quite a long time, the majority shareholder can be the descendant or successor of the founder as well. If an entity holds 75% or more shares in a company, it is capable of passing special resolutions and has significant sway over the direction of a company. In case an entity or a person holds more than 50% of a company’s shares, it can pass ordinary resolutions, such as appointment or removal of members in the board of directors. If an entity holds more than 90% shares of a company, it can consent to the short notice of a general meeting of shareholders. It can also squeeze out minority shareholders in case of a takeover offer.
Minority Shareholder Protection and Rights
As we have already discussed, how majority shareholder vs minority shareholder works in a company, it is time to take a look at the rights of minority shareholders and on what basis they are capable of taking an action. Read the details given below to get proper idea about legal rights of minority shareholders in a public or private sector company.
We all know, a person or entity with less than 50% shares of a company with attached voting rights is referred to as a minority shareholder. However, there are a few classifications when it comes to minority shareholders of a company. For instance, you can classify them as a person or entity holding more than 25% but less than 50% of company shares, then comes the level of the shareholder with more than 15% shares. Similarly, there can be shareholders with more than 5% or 10% shares.
How to Protect Minority Shareholder Rights?
All these types carry their own set of legal rights when it comes to the rights of minority shareholders. Here are some details to give you an idea:
Minority shareholders with 5% or more company shares can demand circulation of a written resolution and can call for a general meeting.
Minority shareholders with 10% or more shares carry the legal right of calling for a poll vote in a general meeting, in addition to the rights held by minority shareholders with 5% or more.
Any entity with 15% or more company shares can refer to legal proceedings in the court if it holds an objection against a variation of share class rights. This right is in addition to the rights of demanding circulation, calling a general meeting, and calling for a pole vote during a general meeting.
Minority shareholders holding 25% or more shares hold the power of blocking special resolutions, such as changing the name of the company.
Now that you know the rights of minority shareholders, if you happen to see anything that feels ambiguous, you can easily call for your legal right as a minority shareholder and take action to halt such a process.
Consult Business Litigation Attorney to Practice Your legal Rights:
Need advice about Majority Shareholders or Minority Shareholders? Call Kleyman Law Group (Brooklyn, NY Commercial & Business Litigation Attorneys) Today!
Things can get quite complicated when it comes to majority shareholder vs minority shareholder, hence it is essential to know your legal rights, whether you are a majority shareholder or minority shareholder. This will help you avoid any compromise and oppression made by either side.
When it comes to practicing the legal rights of shareholders, legal consultation by a boutique law firm NYC wide or elsewhere across the United States can help you a lot. It will also keep you prepared for the legal challenges you may face in the near future.
If you are looking for a piece of advice from experienced business litigation attorneys, Kleyman Law Group New York can help you. We are always available to provide you with effective business litigation and consultation services. If you want our help, we are just a call away. Simply call us and book your appointment now!