A minority shareholder is someone who owns less than half of a business. As a result, the shareholder, typically, has a limited amount of rights and power when making decisions on behalf of a company, unlike a majority shareholder who owns more than half a business.
However, most minority shareholders still have some say over a company’s affairs, such as the right to vote on corporate matters, to see record books and to participate in shareholder meetings.
In some cases, because of how much ownership a minority shareholder has in a business, they may face a risk of oppression. Oppression can happen in two ways: the minority shareholder may have their rights restricted or majority shareholders may act against the interests of the minority.
It may not be obvious when a minority shareholder is being oppressed. To better understand if you’re being subjected to shareholder oppression, then you may benefit from considering the following examples:
Examples of shareholder oppression
There are many kinds of shareholder oppression, the following are just a few examples:
- Limiting shareholders’ right to see record books
- Refusing to let a shareholder in on management decisions or shareholder meetings
- Draining company profits for the majority shareholders
- Funding majority shareholders’ personal expenses with company funds
Knowing your rights as a shareholder
When you set your stake in a company as a minority shareholder, you may enter a shareholder agreement. This legal document can help define your power as a minority shareholder.
Additionally, your contract may outline your protections against shareholder oppression. If this contract is breached, then you may need to be advised of your legal rights in order to seek remedies.