What does minority mean in finance?

A minority interest is ownership or interest of less than 50% of an enterprise. The term can refer to either stock ownership or a partnership interest in a company. The minority interest of a company is held by an investor or another organization other than the parent company.

What are the potential risks of being a minority investor?

If you try to sell minority shares and cannot find a buyer, your investment is trapped. You cannot control the investment’s direction by influencing management, and you cannot invest the money in a more profitable venture. In some cases you may receive no dividends or compensation in return for the investment.

Are minority shareholders entitled to financial information?

In California, minority shareholders have the right to access crucial information about the corporation in which they hold an interest. They have the right to inspect the “record of shareholders” as well as the right to inspect the books, accounting records and the minutes of corporate meetings or proceedings.

What is minority interest example?

For example, suppose that Company A acquires a controlling interest of 75% in Company B. The latter retains the remaining 25% of the company. That portion is the minority interest.

What are the reasons for protecting minority interest?

Central to the rights of minorities are the promotion and protection of their identity. Promoting and protecting their identity prevents forced assimilation and the loss of cultures, religions and languages—the basis of the richness of the world and therefore part of its heritage.

How does the law protect minority interest in a company?

One major protection for minority shareholders is protection from unfair prejudice against them from the majority shareholders and/or company leadership, such as directors. Often, these company leaders are also the majority shareholders.

What are minority protection rights?

Protecting rights of minority shareholders Amendment to any set of articles requires at least 75% of the shareholders to vote in favour of the amendment. In cases of dispute, it is fair to assume that the majority shareholders will not be willing to pass a resolution to assist a minority.

What do minority shareholders want to prevent from happening?

Protecting the Interest of the Company as a Whole To protect the Company and in turn themselves from the abuse of power by any majority shareholder, the minority shareholders need to ensure that the Company’s right of claim is not blocked by the majority’s voting rights.

What are minority shareholder protections?

Protecting Minor Shareholders Against Unfair Prejudice One major protection for minority shareholders is protection from unfair prejudice against them from the majority shareholders and/or company leadership, such as directors. Often, these company leaders are also the majority shareholders.

How are the rights of minority shareholders protected?

The Shareholders Agreement is the best form of legal protection for a minority shareholder. By incorporating certain express contractual provisions in the Shareholders Agreement, the minority shareholder can be protected by contractual rights beyond those afforded by statute and corporate law.