What Are Minority Shareholder Rights?

Referred to as minority equity. When the parent company owns less than 100% of the subsidiary's shares, that is, it only owns part of the equity of the subsidiary's net assets, part of the shareholders' equity in the subsidiary belongs to the parent company, that is, a majority shareholding, and the rest are still owned by other external shareholders. It has less than half of the entire equity of a subsidiary and has no control over the subsidiary, so it is called a minority stake. The shareholders 'equity of the company that has not reached the controlling proportion, that is, the shareholders' equity other than the company's 51% controlling equity. The company's shareholders' equity in the branches and subsidiaries that are not fully controlled. When combining the financial statements of subsidiaries, non-company equity interests in the subsidiaries were recognized as external liabilities of the company.

Minority interest

When the parent company purchases part of the shares of the subsidiary at a non-book value, the minority shareholders' equity

From the financial concept point of view, minority shareholders 'equity refers to the part of shareholders' equity of subsidiaries that does not belong to the consolidated parent company.

For the presentation of minority shareholders' equity in the balance sheet, the new and old accounting standards have different provisions. The old accounting standards stipulated that: the amounts of subsidiaries 'owner's equity that are not owned by the consolidated parent company should be treated as minority shareholders' equity. Prior to the consolidation of the owner's equity items in the balance sheet, they should be listed separately and reflected as a total amount. The calculation formula of the company's total assets is: total assets = liabilities + shareholders (referring to the parent company) equity + minority shareholders' equity. The new standard stipulates that: Shares in subsidiary owners equity that do not belong to the consolidated parent company shall be treated as minority shareholders equity and listed as minority shareholders equity under the owner s equity category in the consolidated balance sheet. The calculation formula becomes: total assets = liabilities + owner's equity (including consolidated parent company's equity and minority shareholders' equity).

By the same token, in the consolidated income statement, the treatment of minority shareholders' profit and loss was originally deducted from the consolidated net profit and loss, and a minority shareholder profit and loss was separately listed before the net profit in the consolidated income statement, and the new The standard stipulates that under the net profit item in the consolidated income statement, it is listed as minority shareholder profit and loss. This change is not only a change in the format of the statement, but also a connotation change as well as the minority shareholders' equity.

Prior to the implementation of the new accounting standards, the practice of listing minority shareholders' equity before owners' equity in the balance sheet brought about the issue of whether minority shareholders' equity was a liability or an equity. In fact, minority shareholders 'equity should not be regarded as liabilities because debts mean that the principal must be repaid within a certain period of time, and minority shareholders' equity does not have this feature. From a merger point of view, minority shareholders are a special group of owners of enterprise groups. All their rights are limited to the companies they invest in, that is, they can only share the dividends distributed by the subsidiaries. When the subsidiaries are liquidated and dissolved, they also Only the remaining property of the creditors of the subsidiary can be shared (in the case of preferred shares, the order of compensation will be later than that of preferred shares). In practice, if the subsidiary has preferred shares and the preferred shares are not held by the parent company, the preferred shares can be combined with minority shares in common shares as minority shareholders' equity, that is, based on whether the minority shareholders have priority, The minority shareholders' equity is divided into the minority shareholders' equity of preference shares and the minority shareholders' equity of ordinary shares. Whether it is the minority shareholders of preferred shares or the minority shareholders of ordinary shares, the order of settlement when the company is liquidated and dismissed is behind the creditors. In other words, minority interests are not essentially liabilities, but owners' equity. The "shift" of the new accounting standards to the owner's equity is the rectification of minority shareholders' equity and the need to be in line with IFRSs.

The new and old accounting standards are based on different guidance theories for the consolidation of accounting statements. The old standard was based on the "parent company theory" as the basis for consolidation. The theory holds that the consolidated statements are prepared in accordance with the interests of major shareholders. The consolidated statements are an extension or extension of the parent company's statements. The users of the consolidated statements are mainly shareholders of the parent company or Creditors, so the basis of the merger is from the perspective of the parent company. The new standard is based on the "economic subject theory" as the basis for consolidation. The theory states that all shareholders of the consolidated subject should be treated equally, and the consolidated statements should reflect the interests of all shareholders.

In the Company Law, in order to prevent the abuse of power by controlling shareholders or major shareholders, a relief or protection system for minority shareholders' rights and interests is also provided accordingly. For example, according to Articles 41 and 102 of the new "Company Law": holding or representing more than 10% Shareholders with voting rights may convene and preside over shareholders 'meetings or shareholders' general meetings under certain conditions. When the company has controlling shareholders, the board of directors can easily manipulate the controlling shareholders. If the minority shareholders do not have this right, it means that the controlling shareholder decides whether to convene a shareholders meeting. Articles 40 and 101 of the new "Company Law" stipulate that shareholders who individually or collectively hold (representative) more than 10% of the voting rights have the right to propose an extraordinary shareholder meeting or extraordinary shareholder meeting, and the content is not limited to this. Give shareholders the right to make proposals, give them the opportunity to communicate their opinions and suggestions to management and other shareholders, and make them more cautious when formulating policies, so as to prevent control shareholders from abusing control rights, promote the realization of shareholders' statutory rights, and protect the interests of minority shareholders .

In addition, the new company law also provides a protection system for minority shareholders' right to know, a cumulative voting system, an avoidance system for voting rights, a system for requesting shareholders to buy back shares under certain circumstances, a right to request the court to dissolve the company under certain circumstances, and a subrogation system .