What are the relevant laws which prevent a corporation with a majority stake in another firm from acting against the interests of the minority stakeholders? Such a corporation could, for example, use its majority to approve the sale of the remaining shares at an extremely low price.

  • Wouldn't such a decision be voted on by all shareholders? If the 51% (or 76%) vote as a bloc couldn't they approve such a sale?
    – JamesG95
    Feb 23, 2021 at 13:53
  • 1
    In the case of an acquisition if a necessary majority of shareholders approve of the sale (usually somewhere between a two thirds and 90% majority) ALL of the shares are sold at the agreed upon price.
    – JamesG95
    Feb 23, 2021 at 14:07
  • If you want specific references to specific laws that would protect you in such a circumstance, then the state would be needed, and the question might be better answered on law.SE. However as-is, I've provided a general summary in my answer below. Feb 23, 2021 at 14:35
  • The rights of minority shareholders are determined by the law in the state where the business is incorporated. And that's why so many corporations are incorporated in Delaware: their laws limit how much those pesky minorities can interfere with what the big boys want to do. Feb 24, 2021 at 13:37

1 Answer 1


In a case where no corporate law exists, then yes, a majority voting bloc could flex its power over minority shareholders and do things to their own personal benefit [by electing a majority of the Board of Directors, who then appoint a CEO friendly to the majority bloc]. A simple example would be to enter into a contract with a related party supplier at exorbitant fees, and siphon off all profits of the company.

However, most jurisdictions do have protections for minority shareholders, and the US is no exception, though specific corporate law will vary by state. Here is a decent writeup of those protections as they apply to Virginia corporations [I am not a legal expert, but quick review of this page seems to show no immediately obvious errors] https://www.generalcounsellaw.com/minority-shareholder-protections/ . The key item relevant to this discussion is that the Board has a 'fiduciary duty' owed to all shareholders, meaning they cannot enrich themselves through abuse of power, and they cannot do something against the general financial interests of the minority shareholders.

Note that in your example, forcing the sale of minority shareholder interests in a corporate takeover wouldn't necessarily be a breech of such fiduciary responsibility. Generally speaking, if you were 'forced' to sell your shares for higher than their market value, then it would be difficult to argue that you have been cheated by that action taken by the board. My general understanding is that, depending on state and country law, you might need to prove that such an action was a breach of fiduciary responsibility [something along the lines of 'they undervalued the company and actually my shares were worth more than I got']. See further discussion of that here [again, no affiliation]: https://smallbusiness.chron.com/force-shareholder-sell-stock-66789.html .

  • And don't most corporate by-laws require a 60% or 2/3 vote?
    – RonJohn
    Feb 23, 2021 at 15:18
  • Perhaps for most public companies, but this answer would also broadly apply to private corps, which can do anything they want, limited only by corp law, which will differ by jurisdiction. Feb 23, 2021 at 15:21
  • Also as a side note - this answer is purposefully avoids concepts like 'corporate raiders' who achieve short-term shareholder success at the cost of long-term business profitability / employee layoffs, etc.. These are related but different concepts [as an example, activist investors are often not even majority shareholders, but rather investment companies that buy 10-30% of a company's stock which can be enough to achieve great influence over business decisions]. See more on that here: investopedia.com/terms/r/raider.asp Feb 23, 2021 at 15:48

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