Issues of company restructuring always require thorough preparation and study of the legal framework for its implementation. This requirement is especially relevant for the processes of selling a company. There are quite a few legal mechanisms and techniques for selling a company that can help organize this process, but this does not diminish the number of questions that may arise during the sale. One of the most frequently asked questions is can a majority shareholder sell the company. We suggest you learn a little more about majority shareholders to understand how extensive their rights and options are for selling a company.
Who are majority shareholders?
To begin with, you need to expand your knowledge a bit and find out who the majority shareholders are. Simply put, a majority shareholder is one of the owners of a company who controls more than 50% of the company. It does not matter the status of the owner – it can be an individual or a company, or it can be the government. Despite the large shareholding, the majority shareholder cannot be considered the sole owner of the company – when making decisions, he must take into account the opinion of other shareholders by voting at shareholders’ meetings. It is also a mistake to think that the owner or founder of a company is a majority shareholder – in practice, this does not happen very often.
Majority shareholders have a certain set of rights and privileges that determine their position:
- They have the final say in decision-making if consensus cannot be reached at meetings;
- They can initiate a shareholders’ meeting if there is a problem or if the company starts to develop in a different direction than the statute provides for;
- They can supervise the work of the board of shareholders and raise the issue of replacing members of the board who are not faithful in their duties;
- They are not responsible for the financial stability of the company – if there are difficulties with debts, the property of the majority shareholders outside the company cannot be used as a means of payment.
The presence of majority shareholders in the management structures of the company makes the management process more stable and resilient to external conditions.
Can a minority shareholder block a sale: basic conditions
In spite of the extensive rights of the majority shareholder, they cannot be the sole manager of the company, especially when it comes to restructuring the company through a sale. If the majority shareholder is interested in selling the company, the minority shareholders can block this decision at a vote. However, the majority shareholder is not the owner of the company, so he cannot make such decisions on his own.
In order to induce the minority shareholders to sell the company, the majority shareholder may resort to several methods:
- Buying out the minority shareholders’ rights at a fixed price or another set by the shareholders’ agreement;
- Convincing the minority to sell the company through negotiations, while making sure that the actions of the majority shareholder do not overstep the legal requirements.
If the sale of the company is a necessary measure at this stage of its development, it is worth finding methods to communicate the need to sell to all shareholders. Only then can the necessary agreement for the sale be achieved. All other methods can be calculated as exceeding the authority of the majority shareholder or the current legal norms about the operation of the joint-stock company.