Majority Shareholder Law and Legal Definition
Majority shareholder is a shareholder who owns and controls most of a corporation’s stock. Only those persons who own more that 50 percent of a company’s shares can be a majority shareholder. Generally, a majority shareholder has more power than all of the other shareholders combined. S/he also has the authority to do things that other shareholders do not have, such as replacing a corporation’s officers or board of directors. Majority shareholder is commonly seen in private companies rather than public companies.
In Crosby v. Beam, 47 Ohio St. 3d 105 (Ohio 1989), the court held that “Majority shareholders have a fiduciary duty to minority shareholders. A majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at the expense of corporate interests.” The court further observed that “Majority or controlling shareholders breach the fiduciary duty to minority shareholders when control of the close corporation is utilized to prevent the minority from having an equal opportunity in the corporation.”.
However, the court in Smith v. N.C. Motor Speedway, Inc., 1997 NCBC 5 (NCBC 1997), observed that, “Shareholders, including majority shareholders, do not owe fiduciary obligations to other shareholders when selling their own stock in a corporation. Shareholders have a right to control and vote their shares in their own interest. They are limited only by any fiduciary duty owed to other stockholders. It is not objectionable that their motives may be for personal profit, or determined by whim or caprice, so long as they violate no duty owed other shareholders. The owner of corporate stock may dispose of his shares as he sees fit. In selling their stock, stockholders necessarily act for themselves and not as trustees for other stockholders.