What Is a Majority Shareholder?
Let me explain what a majority shareholder is: it's a person or entity that owns and controls more than 50% of a company's outstanding shares. As a majority shareholder, you have a significant amount of influence over the company, particularly if your shares are voting shares. These voting shares allow you to vote on key corporate decisions, such as who sits on the board of directors.
When you hold voting shares as a majority shareholder, you can have substantial sway over the company's direction.
Key Takeaways
- A majority shareholder is a person or entity who holds more than 50% of shares of a company.
- If the majority shareholder holds voting shares, they dictate the direction of the company through their voting power.
- The exception to a majority shareholder's voting power is if a super-majority is required for a particular voting issue, or certain company bylaws restrict the power of the majority shareholder.
Understanding the Majority Shareholder
You should know that a majority shareholder is often the founder of the company. In older businesses, it could be the founder's descendants. By controlling more than half of the voting interest, you become a key stakeholder influencing business operations and strategic direction. For instance, you might have the power to replace officers or the board of directors.
Not all companies have a majority shareholder, and it's more common in private companies than public ones. For companies that do, the role varies: some majority shareholders are hands-on with daily operations, while others delegate to executives. You might be the CEO or not, especially in smaller companies with fewer shares.
In larger firms with billions in market cap, investors often include institutions holding large shares.
Majority Shareholders and Buyouts
If you're a majority shareholder looking to exit or dilute your position, you might approach competitors or private equity firms to sell your stake or the whole company for profit.
For a buyout, an outside entity needs over 50% of outstanding shares or votes from at least 50% of shareholders favoring it. A buyout means acquiring controlling interest, often synonymous with acquisition.
Even with more than half the shares, you might not authorize a buyout alone without additional support, based on bylaws. If a supermajority is needed, you could decide solely if you meet it and minorities lack blocking rights.
Minority shareholders have rights like derivative actions or fraud claims to block buyouts. If they find terms unfair and want out, they can use appraisal rights, where a court assesses if the share price is fair and can force a better offer.
Example of a Majority Shareholder
Majority shareholders are often companies owning controlling stakes in others. Take Berkshire Hathaway, led by CEO Warren Buffett: it holds majority stakes in many companies.
Berkshire Hathaway itself has shareholders but no majority one. Since most companies with majority shareholders are small, few well-known ones exist, but Dell Technologies is an exception. According to a May SEC proxy filing, Michael Dell controls about 52% of the company's equity.
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