BusinessDirectory.com defines a minority shareholder as:

Equity holder of a firm who does not have the voting control of the firm, by virtue of his or her below fifty percent ownership of the firm's equity capital.

When we think about minority shareholder rights, we probably associate this with our rights when we buy into a publicly listed company rather than private equity deals between a small business and an angel investor; however, many of the same issues apply irregardless of scale.

When an angel investor purchases shares in a company that are less than 50% of the value of the company, then the issue arises of what rights they have within the company. If you really want to break things down you can generate quite a long list of rights that a minority shareholder might be entitled to. In an article entitled Minority Shareholder Rights in Ontario Private Companies, business lawyer Phil Thompson describes 15 general classes of rights that minority shareholders are entitled to under Ontario's Business Corporations Act:

1. Shareholder meetings
2. Directors
3. Share certificates and transfer rights
4. Appropriation of corporate financial resources
5. Corporate records
6. Financial records, statements and auditors
7. Voluntary liquidation
8. Amending articles
9. Amalgamations
10. Sale of the corporation
11. Court ordered investigations
12. Derivative actions – rights to intervene in corporation litigation in certain circumstances
13. Court ordered winding up in certain circumstances
14. Oppression remedy - rights to seek court protection from oppressive actions by board or majority shareholders
15. Unanimous shareholder agreements

The reason I became interested in the issue of minority shareholder rights was because I saw a surprising claim in a book on Private Equity in Emerging Markets that I am currently reading:

In Chapter 13 of this book, entitled Private Equity in Southeast Asian Emerging Economies: An Institutional Perspective, the authors display this table ranking countries on various business-friendliness attributes.

Notice that the US is ranked the lowest on Protection of minority shareholders of all the countries compared (in case you can't read it, the legend says higher rank in "protection of minority shareholders" indicates minority shareholders are protected by law).

I'm still not sure what to make of this ranking, but it does suggest that minority shareholder rights are more protected in some emerging markets than in so-called developed markets. Whether the US gets a low ranking due to poor laws or the lack of enforcement of laws is a question I can't answer, however, I suspect the latter.

There are many interesting rankings in the table above than just the ranking having to do with minority shareholder rights. It is repays closer study.