What Are The Rights of Minority Shareholders?

You might imagine that under commercial law the majority shareholder holds all the power and that what they say goes. This is true to an extent, however, minority shareholders do have rights and commercial law has clear guidelines as to how those rights must be honoured.

A minority shareholder is someone or an institution that holds less than 50% of the shares of a company. In normal circumstances, this means that, regardless of the views, opinions or wishes of minority shareholders, if the majority who hold over 50% individually or collectively, take the opposite view, then the majority’s view will prevail.

Whilst it is always advisable that you speak to a professional financial advisor before entering into an arrangment like this, it is a simple principle to understand and is nothing sinister, as in many walks of life the majority view prevails. In all kinds of organisations, including governments,  50% +1 is enough to carry any vote. Within companies, this is the same, but that does not mean minority shareholders do not have rights and obligations akin to those of majority shareholders, as we will now explain.

Minority Shareholders Rights

Many of the rights that majority shareholders have also belong to minority shareholders. The fact that someone has a 10% share in the company versus someone with a 55% share, might mean that they do not always win votes when they are taken, but it still affords equal rights in many aspects of how a company operates.