Minority stake

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Owners or investors hold a minority stake in a corporation if they own a block of shares that make up less than half its total stock. Depending on the size of that block and governing laws, minority stakeholders can nonetheless exercise some influence over board decision-making.

Blocking scheme

As well as buying a large number of its shares, stakeholders can also find themselves with a minority interest in Company A if they own a controlling stake in Company B that Co. A then acquires. This minority interest must then be accounted for separately from Co. A's regular financial statements since the two are considered a single entity under U.S. accountancy practices.[1]

Depending on legal jurisdiction and company rules, minority shareholders that hold more than a certain percentage of a U.S. corporation's stock - usually one quarter or one third of the total stock - hold veto power over board decisions at extraordinary general meetings.[2] Such a stake is referred to as a 'blocking minority'. In other cases, minority shareholders can register their dissent - under certain conditions - from board decisions to protect their investment by gaining the fair value of their stake plus interest.[3]

References

  1. Minority Interest. Investor Glossary.
  2. Definition of Blocking Minority. Vernimmen.com.
  3. Minority Share Interests - The Good, the Bad and the Ugly. Acquisition Advisors.