What is the Role of a Shareholder?

Minnesota Corporations: What is the Role of a Shareholder?


A shareholder is any person, company, or other institution that owns at least one share of a company’s stock. Shareholders are a company’s owners. A shareholder will profit if the company does well, but will potentially lose if the company is not successful. Shareholders of a corporation do not participate in the management of the corporation in their capacity as shareholders. Approval from a shareholder is needed when the corporation takes certain actions, including sale of assets of a corporation, amendments to the articles of incorporation, and dissolution of the corporation. Minn. Stat. §§ 302A.135, 302A.661, 302A.721.

A corporation must adhere to the notice and content requirements in the Minnesota Business Corporation Acts for shareholders meetings. Minn. Stat. §§ 302A.431, 302A.433, 302A.435. There must be notice given to all shareholders regarding shareholders meetings and for special meetings. The notice must articulate the reason for the meetings and any business to be conducted therein. Minn. Stat. §302A.435(3). There must be at least 10 days’ notice for the meetings and no more than 60 days from the date of the meeting. Minnesota Statute § 302A.435(2). If a corporation fails to give proper notice, any action taken during that meeting is void.

For a non-public corporation, shareholders do not have to meet to take action in the corporation. If consent from the shareholders is given and is unanimous and written down, then any action from the shareholders may be approved. Minn. Stat. § 302A.441.

Shareholder Control Agreement

A shareholder control agreement is a written agreement among shareholders of a corporation regarding the control of a phase of the business and affairs of the corporation, its liquidation and dissolution, and relations between the shareholders. Shareholder agreements give the freedom to shareholders to utilize different structures to run the business and therefore allow shareholders to circumvent the Minnesota Business Corporation Act’s detailed provisions.

Restrictions of an S Corporation

An S corporation derives its name from subchapter S of the Internal Revenue Code. If a corporation wants to be taxed as an S corporation, all shareholders must consent. IRC § 1362(A)(2). To qualify as an S corporation, the corporation must be a domestic corporation, not have more than 100 shareholders and shall have only shareholders who are individuals, certain trusts, estates, and certain charitable organizations, not have any non-resident aliens as a shareholder, and not have more than one class of stock. IRC §§ 1361 (b)(1)(A), 1361 (b)(1)(B), 1361 (b)(1)(C), 1361 (b)(1)(D).