Majority Shareholder Rights & Decisions

paul7g

Hi,

I’ve started a new small business which is doing ok, and i’ve been approached by someone who would like to invest in it.

Without going into the ins and outs of the business, the investment, and if it is a good idea, i’d like to understand one thing.

When decisions need to be made and shareholders have different opinions on which route to take, am I right in saying that the majority shareholder has the final say, or does it work differently?

P

pedroeibar1

What has happened to the business since you asked about this before?

The straight answer to the question in #1 is ‘no’.
It depends on the type of shares. If the company issues new shares to the new investor, those shares may or may not have voting rights attached to them. So, if you want money for expansion/investment in plant/whatever, and you find someone willing to pony up cash by way of a share allocation, if the shares are the same as yours whoever has the most carries the day. However, if you issue ‘Class B’ share with no voting rights attached, you still have control., regardless of the amount. The downside of the latter type of share is that the investor is powerless so it is not an attractive proposition and they walk/ do not invest.

What is critical is to have a shareholders’ agreement, drawn up professionally. (Same advice as last year!)