Majority Investment

A majority investment gives the investor more than half of the shares and generally control over a company. The investor can determine key decisions on strategy and management. Investors choose this form when they want to actively steer the direction of a company.

It should be noted, however, that a simple majority does not carry every decision: amendments to the articles, capital measures, transformations and dissolution generally require a three-quarters majority in both a GmbH and a stock corporation, which is why only that level counts as a qualified majority. Minority shareholders also hold information, disclosure and litigation rights that a majority cannot switch off, and the shareholders' agreement may additionally grant the minority consent rights. From a buyer's perspective the majority is more than a voting question: it enables consolidation in group accounts, access to cash flow through distributions or a profit transfer agreement, and implementation of a value creation plan without permanent negotiation with a co-shareholder.

For the seller, selling the majority means giving up entrepreneurial leadership, so any retained minority must be carefully protected contractually, in particular through tag-along rights, information rights and provisions on valuing a later sale of the remaining stake. Under competition law, acquiring control triggers a filing obligation once the turnover thresholds are met. For the buyer the size of the stake is therefore not only a question of control but also of tax and accounting consequences: only at certain levels are a profit transfer agreement, a tax group and full consolidation without minority interests feasible. Financing also deserves thought, since a larger stake ties up more equity. Combining a majority with an option to increase later is therefore common.

Note: This explanation is for general information only and does not constitute tax or legal advice. The tax and legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified tax adviser or lawyer.