Minority and majority shareholders play different roles in Bahamian companies. Balancing their rights and needs in a company helps the company continue to run smoothly.
What Are Minority and Majority Shareholders?
A majority shareholder owns more than fifty percent of a company's shares. This is referred to as a controlling interest in the company because the majority shareholder can vote all of his or her shares in favor of or against a shareholder resolution.
In contrast, a minority shareholder owns less than fifty percent of a company's shares. Some companies have many minority shareholders who own small percentages of the total shares. Others have only a few shareholders, but none of them own a majority of the shares.
Actions that a Minority Shareholder Might Take
Minority shareholders may attempt to purchase more shares in a company in order to obtain a majority of shares or at least a larger number of shares. They also may raise protests against majority shareholder attempts to force decisions on them. Further, several minority shareholders may join together, agreeing to vote down a proposal by pooling their votes to make a majority.
Actions that a Majority Shareholder Might Take
Majority shareholders often use their voting rights to press forward proposals with which all the other shareholders do not necessarily agree. Sometimes companies will put procedures in place to protect minority shareholders, or the minority shareholders may raise legal claims in some instances.
Because a majority shareholder has voting control in a company, he or she effectively controls who is on the board of directors. The majority shareholder can shape the direction of the company by choosing directors who hold particular opinions or business philosophies. However, directors' fiduciary duties, such as the duty of loyalty, still dictate that directors must act in the company's best interest, not necessarily that of the majority shareholders. If directors do not obey the duty of loyalty, minority shareholders may have the basis for a legal action.
To find out more about minority and majority shareholders, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.
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