In the article, we will consider what a blocking block of shares is. Investors who are interested in managing a company often seek to hold a block of shares that allows them to reject decisions made by other shareholders. That is why many investors are interested in the issue of the number of securities in a blocking shareholding. It is called that way.
In certain situations, the owner has the opportunity not only to block, but also to make strategically important decisions regarding the development of the organization. Perhaps this is not only in the presence of a sufficient percentage of preferred shares, but also in some other situations. We will tell you more about the blocked block of shares (more precisely, the blocking one) below.
Block of shares
It is customary to understand a package of shares as a combination of securities issued by joint-stock companies and held by one owner. In this case, one should take into account not only the total number of securities issued by the joint-stock company, but also their ratio between all shareholders. To be able to resolve any issues with the organization’s directors, a sufficient percentage of ownership of the shares issued by this joint-stock company is required. A shareholders meeting can be held if there are 5% or more shares.
In addition to ordinary shares, the company has the right to issue preferred securities. They differ in that the shareholder who owns them cannot manage the company through meetings of shareholders. But during the liquidation of an AO, he has the right to vote on a variety of key points. Instead of voting rights, holders of preferred shares have some other advantages:
- On their shares, they receive dividends that are independent of the profits earned by the company.
- Upon liquidation of the joint-stock company, they have the opportunity to receive part of the property, moreover, as a matter of priority. Holders of ordinary shares may claim the property of the joint-stock company only after them.
In accordance with applicable law, a company can issue preferred shares in the amount of not more than 25% of the total number of securities. Blocking block of shares - how many percent? Let's figure it out.
Sizes of promotional packages: up to 10%
An individual who owns 1% of the company’s shares has the right to access the register of shareholders. That is, the shareholder has the opportunity to view the state of the register on a daily basis in order to analyze the receipt of profit and further actions related to the purchase or sale of shares. Each strategic investor begins the acquisition of shares in a particular company with 1%.
If the shareholder's share reaches 2%, he has the right to nominate his representative, who will participate in the board of directors. In addition, he gains the ability to manage the joint-stock company, as the board of directors will have to reckon with his vote.
If there is a 10% stake, the shareholder has the right to hold extraordinary meetings of directors. In addition, the owner of a package of this size may require verification, and unscheduled, of the financial activities of the joint-stock company. But this is far from a blocking stake.
Above 20%
To acquire a 20% stake, the investor must obtain permission from the Federal Antimonopoly Service. The shareholder, who owns 20% of all securities issued by the company, has great prospects. He also has freedom of action regarding the management of the company.
Blocking block of shares (blocking)
Often, shareholders wonder about its size. The owner of such a package of securities may at his own discretion and individually block any decision and issue raised for discussion. So, how much is a blocking block of shares?
The shareholder must have a package of 25% + 1 security. The owner of the blocking block of shares is able to reject significant decisions regarding the management of the joint-stock company, but also to take generally managerial decisions if the owner of the controlling block of securities is absent. This possibility persists in cases where more than one shareholder has a controlling stake. For many investors, the priority is to obtain a blocking stake, not a controlling one.
Controlling stake
If a shareholder wants to own a controlling stake in securities, he will need to accumulate 50% + 1 share of all issued financial documents. An investor who has at his disposal a controlling blocking stake has the right to resolve issues related to dividend payments. His opinion is also significant in matters of the strategic development of the organization.
What proportion of securities in practice should be contained in a controlling stake?
As mentioned above, in theory, a shareholder should own 50% + 1 security in order to have a controlling stake in financial documents. But in practice, this number is much lower, usually varies between 20-25%. In addition, there are examples in history when the ownership of 10% of the shares was enough to block objectionable decisions and manage the company. Similar options are possible if one of the following conditions is met:
- Securities of the organization are accumulated in the hands of investors who are currently in a geographic distance. For this reason, not all of them may be constantly present at joint meetings held out of turn.
- Shareholders are passively attuned to their meetings.
- A certain proportion of the issued shares of JSC are preferred. Therefore, their owners do not have voting rights. In such a case, redistribution of shares held by investors is carried out.
If the shareholders meeting was attended by shareholders whose total block of shares is only 80%, then the size of the blocking block is not 25% + 1 security. The possibility of blocking decisions arises for a participant with a smaller share of shares. In addition, the following statistics are observed: the share of blocking and controlling stakes may be the less, the more in the company of minority investors.
Differences between blocking and controlling stakes
Studying the concepts of these packages allows us to conclude that a shareholder with a controlling stake is automatically considered the owner of the blocking stake.
The owner of the blocking package may veto decisions of other investors. But it should be noted that the owner of a controlling stake can, in turn, both block the ideas of other directors and solve many managerial issues regarding the direction of development and payment of dividends.
More than 75% for what is required?
Some issues in the management of the company, however, require more than 75% of the vote. These include:
- Questions about the liquidation of AO.
- Consideration of options for changing status, reorganization, merger.
- Reducing the size of the authorized capital (UK) by reducing the nominal price of each security.
- The increase in the size of the Criminal Code.
- Determining the value of securities before the upcoming issue.
- The decision to acquire its shares traded in the securities market.
- Planning a major transaction, the value of which is more than half of the company's assets.
Thus, the share packet of the blocking packet may be different. In theory, it equals 25% + 1 security, but in practice it often happens that it is much smaller. Similar situations arise under various conditions.