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Definition

A shareholding of less than 50% of the total issued share capital of a company. Companies work on the principle of majority rule - decisions are made by the majority of votes in the company. Because ordinary shares usually have one vote each (although there are sometimes voting and non-voting ordinaries), this means that whoever controls at least 50% of the shares controls the activities of the company. The Companies Act goes to considerable lengths to protect minority shareholders from any unlawful actions of the majority - or any actions, which are not in the interest of the company as a whole. Any such action could constitute what is called a "fraud on the minority". When looking at the consolidated accounts of a company it is common to see a minority interest shown. This means that the holding company has subsidiaries in which it holds less than 100% of the share capital. The holding company is obliged by law to consolidate the whole of the subsidiary into its accounts, and therefore must itemise that portion which belongs to minority (or "outside") shareholders.

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