Deal Notes - Registered Logo

Minor can be Major in a Sale Process

The legal definition of a minority equity holder (shareholder, member, partner, etc.) is an equity holder who owns less than 50% of a company’s voting interests. In most cases, a minority equity holder does not have the ability to control a company.

While in most circumstances, a minority equity holder does not have formal legal control in a sale process, they can easily delay or disrupt one. If a minority equity holder disagrees with a sale process, for any or no reason, the mere fact that they express a negative stance against the sale is often sufficient to cause most buyers to refuse to be involved with a sale process. While buyers recognize that legally the majority equity holders are likely to win in litigation against those minority equity holders who are against the sale, this litigation is likely to be expensive, take time, and be very distracting to the management of the business, especially in the case of a smaller business.

The best way to avoid a minority shareholder disrupting a sale is by keeping them well informed about your intentions to sell and gaining their favorable support for selling, long before initiating a sale process. Additionally, during the sale process, you should keep them well informed about the sale process.

Have a great day everyone,

Ryan Kirby
Junior Partner