Shareholders are people who have purchased interests in a company that makes them partial owners of the company. The majority shareholder is the individual who owns most of a company’s shares. This means she generally has more power than all of the other shareholders combined. Such situations are usually more common with private companies than with public companies.
Being a shareholder requires a person to own at least one full share in a corporation. If this is the case, the shareholder is usually afforded certain rights in regards to the company he invested in. For example, such an individual may have the right to attend annual meetings, bring resolutions, and vote on matters regarding operations.
To be a majority shareholder, a person generally must own more that 50 percent of a company’s shares. When this is the case, the individual generally wields a substantial amount of power over the corporation. She likely has the ability to do things that other shareholders do not have the authority to do, such as replacing a corporation’s officers or board of directors.
Being a majority shareholder may sound like a situation characterized only by advantages, but there are many reasons this individual needs to exercise caution. Investing in a company that has a majority shareholder can place the minority shareholders at an extreme disadvantage. For this reason, the law often seeks to protect these individuals by placing certain obligations upon the person who owns the majority. These will vary depending on the location and the type of corporation, but in any case, there can be consequences for not living up to these obligations.
For example, the majority shareholder is not supposed to manipulate her authority for unfair personal benefit. This is true even if she is the founder of the company. Due to rules in her jurisdiction, she may be responsible to ensure proper disclosure of certain information and she may be obligated to provide fiduciary duties. Failing to do so can lead to claims being brought against her by the minority shareholders.
In some instances, voting rights can negate some of the power from the majority shareholder. Some companies have votes that carry different weights. This means a person can own the majority of a company’s shares but he may not have a lot of authority. It should also be noted that majority shareholders do not have to be individuals. It is common to find that one company owns the majority of shares in another business.