The minority shareholder is the owner of shares in an organization that, even though it holds the right to vote at meetings, does not have enough influence to decide on its own.
It is a common profile in both public and private companies.
As the share of the shareholder’s shares is insufficient to become a controlling shareholder or majority shareholder, he is often overwhelmed by their decisions.
However, there are legal provisions designed to provide protection and the distribution of administrative authority.
Knowing them is an excellent way to exercise power in the company in which you invest, even as a minority shareholder.
What are the main characteristics of a minority shareholder?
There are two ways to become an organization’s minority shareholder.
In the first, the investor acquires preferred shares .
As a rule, this type of share does not grant voting rights, so the shareholder is unable to take a position on organizational issues and influence its direction.
In the second, common shares are purchased.
The right to vote, in this case, is guaranteed. However, when compared with the parcels concentrated in the hands of other investors, the amount acquired becomes negligible and the weight of its opinion is reduced.
What are the advantages of becoming a minority shareholder?
It is important to note that being a minority shareholder is not, in any case, a bad thing.
More than focusing on the lack of influence, we need to remember that investors do not necessarily want to have the same level of command as a controlling shareholder.
For them, it may be enough to enjoy the advantages offered by the shares, without the “weight” of the majority responsibilities.
That is, they can vote (if they have common shares), receive dividends and interest on equity and also have priority over the purchase of new shares and subscriptions.
For many, it is enough.
What are the rights guaranteed to minority shareholders?
From a legal point of view, the minority shareholder is seen as one of the vulnerable parts of the corporate relationship.
For this reason, there are legal instruments designed only to suppress an eventual oppression of their interests.
In other words, the articles of the Brazilian Corporate Law on the topic prevent the minority shareholder from being put “on the sidelines” by the most powerful shareholders.
Among the main “weapons” of the minority shareholder are:
- The chance of giving up: If the minority shareholder proves that the company’s actions have caused him any loss, he can withdraw from the company, receiving the same amount paid for his shares.
- The sale on delisting:If the company decides to go public, it is obliged to launch a public offering, at a fair price, for all shares (including minority shares).
- The restriction on the number of non-voting shareholders:At most, 50% of the shares may not grant voting rights (that is, be preferred shares). Thus, it is prevented that decision-making power is concentrated in a few investors.
- Tag along:If the company goes through a transfer of control, it is mandatory that the amount paid per share corresponds to at least 80% of the price spent on the controlling block.
- Participation in the board of directors:The representative of minority shareholders, united in blocks that make up at least 10% of the share capital, can elect a member and an alternate in the election of new directors.
- The institution of a fiscal council:In cases of distrust, minority shareholders may join and demand the creation of an independent fiscal council, aimed at evaluating the company’s balance sheets and other statements.
- Postponement of meetings:Any shareholder may request an increase in the term for calling the meeting or, otherwise, its interruption.