Are there even any large functional differences?
Obviously in terms of decision making, there is no difference since 51>49 so you control who is on the board.
But what about company assets? If you own 51% of a company, I guess you do not own the assets entirely.
Do you have more freedom and power in this respect by having 100% ownership?
Thanks!
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There are some large functional differences with one of them being the ability to get additional investors/stakeholders on board while retaining a controlling share. Often to get investors you need to give away some equity in your company; when you own 100% you can raise a lot of money by selling equity and still maintaining your controlling share.
however if youre at 51%, you will likely have to lose a controlling share (aka controlling interest) to bring additional investors on board and raise more money (unless u have a royalty deal or something like that instead of equity or they agree to take non-voting shares instead). This means you either have to be willing to give up your shares or your ability to raise capital will be limited. For example you see this in Shark Tank where founders may have given away a decent chunk of equity in initial seeding rounds and are reluctant to give the sharks any additional equity that might cause them to lose a controlling share.
Also with many companies even if you own 51%, the board still has a fiduciary duty to the shareholders, NOT you.
Certain companies, especially many VC backed startups where they fill the board with VCs, may have a specific structure or bylaws that mean their board can fire a CEO even if they have a controlling interest. This is why startup founders that are backed by VC even while having a controlling interest may find themselves fired despite assuming 51% ensured they had job security. If you own 100% of a company, it is private and u can do what u want.
Yes, there are differences in freedom.
Majority shareholder is still required not to fuck over minority shareholders. You need to have legitimate business reasons to do stuff.
There can also be some decisions that require supermajority, which asks for more than 50%.
You and a friend decide to get lunch together, and pool your money to do so. You add in 49% while your friend adds in 51%. Your friend still has to take your tastes into mind when ordering the food, or deciding on which place to eat at – they cant just take all the money and buy porn with it or pay off their credit cards.
You go to lunch on your own the next day, and can eat what you want where you want, theres no one else that you need to take into consideration.
Basically, a 51% shareholder has a duty of care to the minority shareholders, and cannot act as owner of the company because they are not – they cannot use the companies assets or resources for their own benefit, and have to be careful of conflicts of interest that cause minority shareholders harm or damage.
A 100% shareholder has no burden of care for other shareholders because there is none.
Some votes require 2/3, some require 3/4. 51% gives you a majority, but some votes require more of a unanimous vote.
Owning 51% does not always allow you to control who is in the board. Nobody would agree to own the other 49% if they thought the majority owner could run roughshod over them. Instead, the minority owner frequently negotiates specific protections for themselves.
Also, the majority owner has fiduciary obligations to the minority &- the majority can’t, for example, take all the company assets for itself. (Well, at least not without risking a lawsuit it is sure to lose )
Look at it from the other direction. You can go and buy 100 shares of any public company, what’s the difference between that and owning zero?
You don’t control the company, but you still benefit from owning it, and the directors still have a duty to grow its value for you
The main difference is who gets the profits. Owning 49% of a company may not offer you the control that a majority share would but it does offer nearly half of the annual profit.
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