Minority shareholders are people or groups that own less than 50% of a company’s voting shares. They may be individual investors, employees with stock options or smaller institutional investors.
When the company needs to make important decisions, shareholders vote. The choice that gets more than 50% of the votes usually wins. This means that shareholders who own more than 50% of voting shares can control the company’s direction. While this system allows for efficient decision-making, it may not always consider the views or interests of minority shareholders. As a result, they might feel that important company decisions don’t fully address their concerns.
What rights do minority shareholders have?
Every shareholder, regardless of the number of shares they own, has the right to:
- Vote on major company decisions, such as electing board members and approving big changes like mergers. However, voting power is usually proportional to the number of shares owned.
- See certain company records, including financial statements, meeting minutes and shareholder lists. This helps them stay informed about the company’s health.
- Receive their fair share of dividends and other distributions. In most cases, they can also sell their shares if they want to. However, some private companies might have rules that limit this right.
Take note that while these rights exist under Ohio law, how they apply can depend on your specific situation. The company’s own rules, found in its articles of incorporation and bylaws, can impose certain limitations.
What legal protections do minority shareholders have?
Company directors have a special responsibility called a “fiduciary duty.” This means they must:
- Act in the best interests of all shareholders, not just themselves or the majority
- Make decisions that benefit the company as a whole
- Avoid conflicts of interest or using their position for personal gain at the expense of other shareholders
- Uphold honesty, loyalty and care in managing the company
If minority shareholders believe directors have breached their fiduciary duty, they can take legal action. This might include filing a lawsuit on behalf of the company or seeking court intervention to stop unfair actions. In extreme cases, shareholders may request a court-ordered buyout of their shares.
It’s important to protect your interests
Your investment deserves protection, no matter the size. If you’re facing challenges or have concerns about your shareholder rights, it might be time to seek professional legal guidance.