Q&As
Can a majority shareholder holding one class of shares in a private limited company (representing 100% of the voting rights) reduce its share capital, so as to cancel all the shares in a separate class held by a minority shareholder? Must the minority shareholder be given notice of the reduction resolution? Could the minority shareholder object to such a reduction?
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Published on: 02 December 2016
This Q&A assumes that the company proposing to reduce its capital is a private company limited by shares.
Reduction of capital to cancel a class of shares held by a minority shareholder
A reduction of capital is governed by section 641 of the Companies Act 2006 (CA 2006). This provides that, in the case of a private company limited by shares, a reduction may be effected by a special resolution, supported by a solvency statement given by the directors, or by a special resolution confirmed by the court. A special resolution of the members (or of a class of members) of a company means a resolution passed by a majority of not less than 75% of those entitled
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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Majority shareholder definition
What does Majority shareholder mean?
A majority shareholder is a member who hold more than 50% of the shares in a company that has voting rights attached, meaning that it can pass ordinary resolutions (or, where it holds 75% or more of the shares, special resolutions or any other resolution that must be passed by a higher majority) and therefore has a controlling interest. In a majority/minority joint venture, the majority shareholder will usually be permitted to appoint a majority of the directors to the JVC's board and/or to appoint a chair (potentially with a casting vote) and will have control of the JVC's board (as most board resolutions will require simple majority approval).
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