In a company a majority shareholder owns a large chunk of shares, but can they be pushed out? learn to know more
Who Is a Majority Shareholder Contract?
A majority shareholder contract is a person who owns the major shares of the company, which normally means someone who has a share percentage that is more than 50% and enjoys a dominant voting percentage in a company. The majority shareholder might also be an individual or a government entity.
The majority shareholder has additional benefits in a business when compared to all its other shareholders contract. Someone with a majority interest is usually the founder of the firm, or a descendant of the founder if it is a long-established company.
Can the Majority Shareholder in a Company Be Pushed Out?
Practically it is tough to remove a majority shareholder from a company but it is not impossible. As per our experts at Vakilsearch here are some of the things you should know before a majority shareholder in a company is pushed out.
Refer to the Shareholder’s Contract
A shareholder agreement is the Bible for business and shareholders. It contains all the information about the shareholders do’s and don’ts and any specific conditions that are agreed upon during the beginning of the business. If the agreement is not drafting a shareholders properly or contains any loopholes, it may be disastrous. If the procedure regulations are limited, then getting rid of a shareholder for misdeed is much simpler.
This is especially useful when eliminating a majority shareholder – a person who occupies more than 50% of the company’s shares. If they breach anything already asserted in the agreement, one can easily eliminate them based on that violation.
Make sure to be particular and clear when it comes to the shareholder’s agreement. You must examine features that can impact how and when to eliminate a shareholder, as well as any outcomes for doing so. Experts at Vakilsearch suggest to
- Look for points like the dates
- The number of published shares,
- Anything similar to shareholder wealth,
- Clauses regarding the rights of shareholders during the company deal.
If these factors are not recorded properly it may affect the shareholder reduction procedure.
Consult Professionals
Frankly speaking, eliminating a shareholder is not an easy task. You should be abreast of all the clauses mentioned in the shareholder agreement and you should have proper proof for any violation, you should need an expert attorney or legal advice from experts.
In case of an agreed-upon voluntary buyout between the firm and the majority shareholder, it will cost far less than the payment involved in a questioned removal.
Before initiating the process, reach out to our experts, especially without a shareholder agreement in the case. Experts at Vakilsearch can help you to reach the matter in an accurate, negotiable manner while assuring you meet any provincial regulations in this section area. This is important in any business judgment, as it might trigger tension among business members.
Claim the Majority of Shares
This is another way to remove a majority shareholder from the company. Without a mutual agreement or a violation, you will need at least a 75% majority to remove a shareholder, and said shareholders must have a 25% majority. The eviction is attained through votes, and the shareholder is then repaid upon termination.
In the time of contending the majority might work in some trials, it does not against majority shareholders who already have more than 50% majority independently or even majority shareholders with more than 25% majority.
Negotiate With the Majority Shareholder Contract
If all the above mentioned techniques didn’t happen then it’s best to negotiate with the majority shareholder. You should sit down and converse with them, communicating the reasonable importance of their shares and why they should leave. Experts at Vakilsearch suggest having clear facts and a strong reason for pushing out the majority shareholder. Remember that the concerned person once had a major share and will be ready to defend himself.
Once you attain an agreement, you can reach out and allocate their percentages to individuals in the firm. During the negotiation make sure all the shares are allocated. It has to be granted or transported to another shareholder or bought out by the form using proper payment options.
How Vakilsearch Can Help in Drafting the Perfect Shareholder’s Contract
As you can see, drafting a perfect shareholder agreement is crucial. Even if you leave out a single clause the shareholders have to face the wrath. Vakilsearch helps more than 1000 companies every month in different streams of legalities. Our team has the best attorneys and business development authorities. Reach out to our expert team who can help you in drafting the perfect shareholder’s agreement. You should know the fact that our experts do this daily so drafting the perfect shareholder agreement is a piece of cake.
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