As the majority shareholder, you may query the rights of minority shareholders, especially those with 5% or less shareholding in your private company. You may have considered whether, as majority shareholder, you can force minority shareholders to sell their shares to you or to someone else. As a founder, in particular, you may be considering this in the context of an impending exit event. This article explores whether a majority shareholder can force minority shareholders to sell their shares.<\/p>\n\n\n\n
Broadly, a minority shareholder holds onto shares the same way they own any other property. In general, you cannot force a minority shareholder to sell their shares. An exception is if there is express documentation in place providing for this scenario and the minority shareholder has consented. <\/p>\n\n\n\n
A minority shareholder can consent to sell their shares but is entitled to receive fair market value for them. An exception is if they specifically want to gift their shares for less than fair market value.<\/p>\n<\/div>\n\n\n\n
Minority shareholders cannot direct the outcome of certain company decisions. However, they have a number of rights under the Companies Act<\/a><\/em> to protect their interests. As a broad rule, company directors cannot allow the company to be run in a manner which would be unfairly prejudicial to the minority shareholder. Otherwise, they risk a minority shareholder bringing a claim against them.<\/p>\n\n\n\n In addition, certain key company decisions require shareholder approval, such as:<\/p>\n\n\n\n These decisions typically require approval by a special resolution of shareholders, being 75% of the shareholders. Where a minority shareholder votes against such a decision, while they cannot stop the decision proceeding, they can invoke a minority buy-out process. This is where the company is required to buy back their shares for fair market value. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n\n