What is a 'Majority Shareholder'

A majority shareholder is a person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder of the company or, in the case of long-established businesses, the founder's descendants. By virtue of controlling more than half of the voting interests in the company, the majority shareholder has a very significant influence in the business operations and strategic direction of the company, though not all companies have a majority shareholder.

BREAKING DOWN 'Majority Shareholder'

Majority shareholders differ in their approach to how the company is managed. While some continue to be heavily involved in the daily operations of the company, others may prefer to take a hands-off approach and leave the management of the company to the executives and managers. Majority shareholders who wish to exit their business or dilute their position may make overtures to their competition or private equity firms, with the objective of getting a good price for their stake. Since the majority shareholder usually has an iron grip on the fortunes of the company, a hostile bid for it is generally out of the question.

Who Is the Majority Shareholder?

The majority shareholder of a company may or may not be a member of upper management, such as the chief executive officer (CEO). In smaller companies with a limited number of total shares, the CEO may also function as the majority shareholder. In larger firms with significant market capitalization, such as numbers in the billions of dollars, the firm’s investors may include other institutions that possess a larger number of shares.

Majority Shareholders and Buyouts

In order for a buyout to occur, an outside entity must acquire over 50% of the target company’s outstanding shares. While a majority shareholder may hold more than 50% of a company’s stocks, he may not have the authority to authorize a buyout without additional support depending on certain corporate bylaws. In cases where a super-majority is required for a buyout, the majority shareholder can be the sole deciding factor only in cases where he holds enough of the company’s stock to meet the super-majority requirement, and the minority shareholders do not have additional rights to block the effort.

Minority shareholder rights can include the declaration of a derivative action or fraud in the minority, both of which effectively block the completion of the buyout. In cases where the minority shareholders believe the terms of the buyout are unfair and wish to no longer stay with the targeted business, they can exercise appraisal rights. This allows a court to determine if an offered share price is fair and has the option to compel the business initiating the buyout to pay a specified price if required.

  1. Working Control

    When a minority shareholder (or shareholders) has enough voting ...
  2. Shareholders' Agreement

    A shareholders' agreement is an arrangement among a company's ...
  3. Principal Shareholder

    A principal shareholder is a person or entity that owns 10% or ...
  4. Shareholder

    Any person, company or other institution that owns at least one ...
  5. Voting Right

    The right of a stockholder to vote on matters of corporate policy ...
  6. Hands-On Investor

    An investor who holds a large portion of a company's shares and ...
Related Articles
  1. Investing

    A Peek Into Shareholder Meetings

    Shareholder meetings can be glamorous, exciting or controversial, but not particularly revelatory.
  2. Small Business

    Whom Should Corporations Please?

    Companies balance the interests of owners, customers and employees. Find out who comes out on top.
  3. Investing

    Why Do Companies Care About Their Stock Prices?

    Find out how a company's stock price reflects its value to internal and external shareholders.
  4. Investing

    Proxy Season 2016: Most Wonderful Time of the Year

    Each year, public companies hold shareholder meetings where individual and institutional investors vote on the future. Here is what to watch in 2016.
  5. Managing Wealth

    An Introduction To Shareholder Activism

    The secret to being an activist shareholder is to ask the right questions.
  6. Investing

    Proxy Voting Gives Fund Shareholders a Say

    You have the right to take part in important company decisions by proxy.
  7. Investing

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
  8. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  1. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
  2. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  3. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  4. How much, if any, influence do non-controlling interest shareholders have?

    Examine some of the different ways non-controlling interest shareholders can exercise influence over both public and private ... Read Answer >>
  5. What does it signify about the state of a company if it has unusually high shareholders' ...

    Understand the meaning and calculation of shareholder equity and what a high level of shareholder equity signifies about ... Read Answer >>
  6. Why is the value of capital stock important to public shareholders?

    Understand what capital stock is and how it's issued and authorized. Learn why the value of capital stock important to public ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center