In corporation, a minority shareholder is someone who does not have power to control shareholders votes. Despite their smaller voting power, minority shareholders can still wield significant influence through various strategies.
Can influence the board
Sometimes a minority shareholder has the power to require a seat on the board. While the one board position will not be controlling, it can provide a platform for a minority holder to influence board decisions and it typically gives the minority owner much greater access to information about the business.
Leveraging shareholder agreements
Shareholder agreements are crucial tools that can address shareholder rights and obligations such as voting rights, restrictions on transfers of shares and limits on management decisions. A savvy minority shareholder can negotiate terms in these agreements to gain more influence, such as securing additional voting rights or the ability to appoint a director.
Building alliances
Collaboration is essential. Minority shareholders can seek allies among other shareholders to form a coalition with more significant sway within the company. This group can advocate for changes and exercise a stronger voice during shareholder meetings by uniting on common goals.
Resolving disputes
Since litigation can be counterproductive and expensive, disputes between shareholders or between shareholders and a company can be resolved through several alternate methods, depending on the nature of the dispute and any agreements in place. These include:
- Negotiation: This is often the first step, where the parties involved try to reach a mutually acceptable resolution through direct communication.
- Mediation: In mediation, a neutral third party, known as a mediator, helps facilitate discussion and negotiation between the parties to help them reach a voluntary settlement.
- Arbitration: Arbitration involves a neutral third-party arbitrator or arbitrators who make a binding decision on the dispute. This method is sometimes quicker and is generally more private than court litigation.
- Expert determination: In some cases, a dispute may be resolved by appointing an independent expert. This is often effective for technical disputes.
- Internal dispute resolution mechanisms: Many companies have their own internal procedures for handling disputes, which may involve a board or committee review.
Seeking legal guidance
Engaging a knowledgeable business law attorney is often crucial for the minority bloc’s success in protecting its interests. Understanding the intricacies of the company’s articles and crafting a strategic approach requires both legal and business acumen. With determination, knowledge and experience, the right business law attorney can help minority shareholders significantly influence the company’s direction.