Becoming a majority shareholder is a crucial step for those who aspire to take control of a company. This strategic position offers considerable decision-making power and the ability to significantly influence a company’s direction. Whether you’re an ambitious investor or an entrepreneur looking to consolidate your position, this guide will provide you with the keys to achieving this goal. Let’s explore together the strategies, legal implications and challenges involved in becoming the principal share holder of a company.
What is a majority shareholder and what powers does he or she have?
A majority shareholder is a natural or legal person who holds more than 50% of a company’s voting shares. This position confers considerable power within the company. Here are the main advantages and responsibilities associated with this status:
- Control of strategic decisions
- Appointment of senior management
- Direction of dividend policy
- Influence on mergers and acquisitions
The main shareholder plays a central role in corporate governance. It has the casting vote at Annual General Meetings, and can steer the company’s long-term strategy. However, this position also brings with it significant responsibilities, particularly towards minority shareholders and the company’s stakeholders.
It is important to understand that the status of majority shareholder does not mean total freedom of action. Corporate laws and the principles of good governance impose limits and obligations. Fiduciary duty, for example, requires that decisions be taken in the interests of the company as a whole, and not just the majority shareholder.
The following table illustrates the differences between a majority shareholder and a minority shareholder:
| Characteristic | Majority shareholder | Minority shareholder |
|---|---|---|
| Decision-making power | High | Limited |
| Influence on strategy | Significant | Low or nil |
| Legal responsibilities | Significant | Reduced |
| Financial risk | High | Proportional to investment |
Strategies for acquiring a controlling interest
Acquiring a controlling interest can be achieved by a variety of methods, each adapted to specific contexts. Here are the main strategies for becoming a controlling shareholder:
1. Gradual purchase of shares: This approach consists of gradually accumulating shares on the stock market for listed companies. It enables a discreet takeover, but can be costly if the share price rises with each purchase.
2. Takeover bid: A takeover bid is a formal offer to buy a large number of shares at a price higher than the market price. This method is particularly effective for listed companies, and generally requires regulatory approval.
3. Direct negotiation: For unlisted companies, direct negotiation with existing shareholders may be the preferred route. This approach requires negotiating skills and a good knowledge of the company’s value.
4. Capital increase: Participating in a capital increase by subscribing to new shares can increase your shareholding, especially if other shareholders do not follow the operation.
The strategy chosen will depend on factors such as the current shareholder structure, the size of the company, its financial situation and the regulatory environment. It is crucial to evaluate these factors carefully before embarking on a majority acquisition.
Warren Buffett, the famous American investor, often used the progressive purchase method to take control of companies via his Berkshire Hathaway holding company. This approach enabled him to build a diversified empire while minimizing the impact on stock prices.
Legal and regulatory considerations
Taking control of a company by acquiring a majority stake is governed by a set of laws and regulations designed to protect the interests of all stakeholders. Here are the main legal aspects to consider:
- Notification thresholds: In many countries, the crossing of certain shareholding thresholds (e.g. 5%, 10%, 15%) must be declared to the market authorities and to the company itself.
- Mandatory public offer: Above a certain threshold (generally 30% in France), the acquirer may be obliged to launch a public offer for all remaining shares.
- Merger control: Competition authorities may examine the transaction to ensure that it does not create a dominant position detrimental to the market.
- Minority shareholder rights: The law provides protections for minority shareholders, such as the right to information or the possibility of challenging certain decisions in court.
It is essential to enlist the help of specialized legal advisors to navigate this regulatory maze. Penalties for non-compliance with these rules can be severe, ranging from heavy fines to suspension of voting rights.
The case of Elon Musk’s acquisition of Twitter in 2022 illustrates the legal complexity of such operations. The legal twists and turns and negotiations have highlighted the importance of solid legal preparation in large-scale takeovers.
Challenges and responsibilities of the new majority shareholder
Becoming the majority shareholder of a company brings with it many challenges and responsibilities. It’s not simply a matter of acquiring shares, but of taking the reins of a complex organization. Here are the main issues to anticipate:
Managing stakeholder expectations: The new majority shareholder must reconcile the sometimes divergent interests of employees, customers, suppliers and minority shareholders. This requires diplomacy and long-term vision.
Implementing a new strategy: The arrival of a new controlling shareholder is often accompanied by a change in strategic direction. You need to be able to communicate this new vision effectively, and win the support of existing teams.
Financial risk management: As the main investor, the majority shareholder bears a significant share of the financial risk. Prudent management and investment diversification can help mitigate this risk.
Regulatory compliance: Compliance with standards of corporate governance, financial transparency and social responsibility is essential. Regulatory authorities closely scrutinize the actions of majority shareholders.
Business history is full of examples of successful takeovers, but also of resounding failures. Carlos Ghosn, former CEO of Renault-Nissan, was long held up as a model of international alliance management before controversy tarnished his record. This example underlines the importance of ethical and transparent governance for majority shareholders.
Ultimately, becoming a majority shareholder represents both an exceptional opportunity and a major challenge. This position offers the possibility of shaping a company’s future, but also demands great responsibility and long-term vision. Careful preparation, a sound understanding of the legal and financial aspects, and an ethical approach to governance are essential to success in this crucial role.
