Majority Shareholder Definition Example How It Works

Majority Shareholder Definition

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 make decisions in the company. For taking large-scale decisions in any company other than day-to-day affairs, the entity must seek the shareholders’ approval. Thus, to make any decision, the approval of controlling shareholders is necessary. 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 that is not in the company’s interest.

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Example

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 shares, he can’t be called a controlling shareholder. It is so since, to become one, his shareholding shall be over 50%.

Majority Shareholder vs Minority Shareholder

Duties

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 to their advantage only.They shall ensure not to misuse their position to promote their interests at the cost of the company’s general interest.The majority shareholders shall not prevent the minority shareholders of an equal opportunity in the company.They are required to act in good faith and honesty.

Conclusion

The majority shareholders enjoy decision-making power in the company as major decisions require their approval. They should ensure they fulfill their fiduciary duties towards the minority shareholdersMinority ShareholdersMinority interest is the investors’ stakeholding that is less than 50% of the existing shares or the voting rights in the company. The minority shareholders do not have control over the company through their voting rights, thereby having a meagre role in the corporate decision-making.read more and not misuse their rights and privileges. If they feel that such shareholders are suppressing their rights to equal opportunity in the organization, they may file a legal suit against them.