Lesson #2: The Mirage of Minority Shareholdings – When Having a Stake Means Little Power and Lots of Headaches

The Mirage of Minority Shareholdings – When Having a Stake Means Little Power and Lots of Headaches

So, there I was, feeling like a savvy entrepreneur with my shiny new minority stake in a promising venture. It seemed like a fair deal at first: an opportunity to be part of something big, without having to front all of the capital requirement and the burden of being in charge of every little decision. I had visions of dividends rolling in and board meetings where my voice would shape the future of the business.

But then I got a reality check: owning a minority stake is often less about influence and more about watching the majority call all the shots—often without consulting the rest of us. Every now and then, I'd get an email about a decision that was already made, or worse, a “friendly” reminder to vote in favour of something I hadn’t even heard about.

It’s like being handed a voting card for a rigged game; you can cast your vote, but you already know how it’s going to turn out.

And let's not forget the rollercoaster of emotions when the majority shareholder decides to issue more shares, diluting your slice even further, or when they pay themselves bonuses before thinking about dividends. Yes this happened to me ! In a business where I founded the idea, where I did the endless hours of creation on a vision that resulted in a seriously successful and profitable business, only for it to not come to me.

Turns out, being a minority shareholder is sometimes just a front-row seat to watching your investment get restructured, recapitalised, or “strategically pivoted” into something that doesn’t even remotely resemble what you signed up for.

The Other Side: Dealing with Minority Shareholders as a Founder

Then there's the flip side—being the founder dealing with minority shareholders who think their tiny piece entitles them to a say in every decision, from the colour of the office walls to the strategy of the next financial year.

They want updates, transparency, and the occasional "Why wasn’t I consulted on this?" email, all while not quite realising that steering the ship means making tough calls—not sending memos every time you decide to tack left.

Then when things get tough and cash injections needed, they are often not too forthcoming with their percentage of the funding requirement.

We often have to remind people that business make money but they can also lose money. Oh and yes a shareholder is responsible for both.

I will never forget a rather wealthy individual who was constantly assessing how much their % was worth putting stress on us at every turn to get his pay day. But when it went the other way, short of take him to court, we were never going to get his slice.

Takeaway?

Minority shareholdings are a double-edged sword.

As a shareholder, you might get a piece of the upside but don’t expect to steer the ship. As a founder, be prepared to manage expectations, over-communicate, and sometimes deal with the frustration of investors who think their 5% should weigh as much as your 60%.

It’s all about understanding the rules of the game: sometimes you’re in the driver’s seat, and other times, you’re just along for the ride.

So learning that not all shares are created equal is important. Whether you’re the one holding the minority stake or managing those who do, remember that influence and ownership aren’t always a package deal.

Good luck to making wiser investments—and picking the right seats at the table!