Controlling Shareholder Law and Legal Definition

Controlling shareholder means a shareholder who owns more than half of the shares or majority of the outstanding shares in a company. A controlling shareholder generally controls the composition of the board of directors and influences the corporation’s activities. Sometimes, a shareholder who owns a smaller percentage but a significant number of remaining shares in the company can also be a controlling shareholder.

In Locati v. Johnson, 160 Ore. App. 63 (Or. Ct. App. 1999), the court observed that “In order to be a controlling shareholder who owes fiduciary duties, a shareholder must either be (1) an individual who owns a majority of the shares or who, for other reasons, has domination or control of the corporation or (2) a member of a small group of shareholders who collectively own a majority of shares or otherwise have that domination or control.” In addition, the court further observed that “Controlling shareholders of a corporation owe fiduciary duties to the minority. A shareholder does not necessarily have to own a majority of the stock to be a controlling shareholder. Rather, a small group of shareholders who together own a majority and who act in concert may be controlling shareholders and thus may have fiduciary duties to shareholders who are not in the controlling group.”