Majority and Minority Participants of an LLC

A limited liability company (hereinafter referred to as an LLC) is one of the most common organizational and legal forms for conducting business activities. Its attractiveness is explained by the combination of limited liability of participants, a flexible internal management structure, and the possibility of contractual regulation of relations between participants. At the same time, it is precisely in LLCs that the problem of balancing the interests of participants holding a controlling block of votes and participants who are unable to independently influence decision-making becomes most acute.

The new Law of the Republic of Uzbekistan “On Limited Liability Companies” dated April 21, 2026, is aimed at regulating the establishment, activities, reorganization, and liquidation of LLCs, as well as issues of company management and relations between participants. The Law defines an LLC as a business company whose charter fund is divided into the shares of its participants, while the company itself acquires the status of a legal entity from the moment of state registration.

In the legal sense, a majority participant should be understood as a participant who, due to the size of his share, is able to determine or substantially influence the formation of the company’s will. A minority participant, by contrast, does not have a sufficient number of votes to independently adopt key corporate decisions, but retains a set of property, information, management, and judicial rights.

The Share in the Charter Capital as the Basis of a Participant’s Corporate Status

The legal status of an LLC participant is built around the share belonging to him in the charter fund, or charter capital. The size of the share is determined as a percentage or as a fraction and must correspond to the ratio between the nominal value of the participant’s share and the charter capital of the company. The actual value of the share is determined through the value of the company’s net assets in proportion to the size of the participant’s share.

It is the share that performs a dual function. First, it reflects the person’s property participation in the company. Second, it determines the scope of the participant’s corporate influence, since the number of votes, as a rule, depends on the size of the share. Therefore, in an LLC, economic power and corporate power are closely connected.

However, the new law allows for a certain degree of flexibility. The company’s charter may restrict the maximum size of a participant’s share and the possibility of changing the ratio of shares. At the same time, such restrictions may not be established in relation to individual participants; they must apply equally. Their inclusion in, amendment, or exclusion from the charter requires a unanimous decision of all participants of the company.

This provision is important for the protection of minority participants. It prevents the creation of discriminatory structures where restrictions are introduced only against certain participants. At the same time, it allows participants to establish in advance a corporate architecture that prevents excessive concentration of control.

The Majority Participant and Corporate Control

A majority participant in an LLC receives an advantage primarily through the voting mechanism at the general meeting of participants. The highest management body of the company is the general meeting of participants, whose exclusive competence includes key issues: changing the charter capital, amending the constituent documents, formation and termination of powers of executive bodies, approval of financial statements, distribution of profits, conducting an audit, establishment of legal entities, branches and representative offices, reorganization, and liquidation of the company.

The Law establishes several levels of corporate control. A simple majority allows ordinary decisions to be adopted unless a greater number of votes is required by law or the charter. A qualified majority, as a rule, constitutes not less than two-thirds of the votes. Certain matters require unanimity of all participants. For example, decisions on matters requiring increased corporate significance are adopted by a majority of not less than two-thirds of the votes, while a decision on reorganization or liquidation of the company is adopted unanimously by all participants.

Accordingly, a participant holding more than 50 percent of the votes obtains the ability to control most ordinary decisions. A participant holding two-thirds or more of the votes is able to adopt decisions requiring a qualified majority. However, even such a share does not always ensure full control, since matters requiring unanimity remain outside the absolute power of the majority participant.

Thus, the new law does not proceed from the idea of unlimited dominance of the majority. The corporate control of the majority participant is limited by law, the charter, the rights of other participants, the procedure for convening and holding meetings, the obligation to disclose information, and the possibility of judicial challenge of decisions.

Legal Position of the Minority Participant

A minority participant does not possess a decisive number of votes; however, his status is not limited to passive investment. The Law grants all participants the right to participate in the management of the company’s affairs, receive information on the company’s activities, review financial statements, participate in the distribution of profits, alienate a share, withdraw from the company, receive part of the property upon liquidation, and conclude a corporate agreement on the exercise of their rights.

The information right is of particular importance. For a minority participant, access to the company’s documents is a key condition for monitoring the actions of the majority participant and the executive bodies. The company’s charter must contain the procedure for storing documents and the procedure for providing information to company participants and other persons.

In addition, participants holding in aggregate not less than 10 percent of the charter capital have the right to demand in court the exclusion of a participant who fails to perform his obligations or, by his actions or inaction, obstructs the activities of the company or significantly impedes them.

This provision has a dual nature. On the one hand, it may be used by the majority against an unfair minority participant. On the other hand, it provides a group of minority participants with a tool to protect themselves from a participant whose conduct blocks the company’s activities or causes harm to it.

Guarantees of Minority Participation in the General Meeting

The procedure of the general meeting is the most important mechanism for protecting minority participants. The Law requires that each participant be notified of the general meeting no later than 30 days before it is held. The notice must indicate the time, place, and proposed agenda. Any participant has the right to submit proposals for the inclusion of additional matters in the agenda no later than 15 days before the meeting.

Participants or their representatives have the right to participate in the discussion of agenda items and to vote when decisions are adopted. Provisions of the constituent documents or decisions of the company’s bodies that restrict these rights are deemed invalid.

These provisions are especially important for minority participants, since violation of the procedure for convening and holding a meeting is often used as a means of effectively excluding them from corporate management. Legislative protection of the right to participate in the meeting reduces the risk of decisions being adopted without proper notice or without providing the necessary information.

Judicial Protection Against Abuse by the Majority

One of the central mechanisms for protecting minority participants is the right to challenge decisions of management bodies. A decision of the general meeting adopted in violation of the law, other legislative acts, or the charter, and violating the rights and legitimate interests of a participant, may be declared invalid by a court upon the application of a participant who did not take part in the voting or voted against such decision.

This provision forms a legal barrier against abuse by the majority. A majority participant cannot legitimize any decision merely by virtue of the number of votes. If a decision violates the law, the charter, or the rights of a participant, it may be subject to judicial review.

The provision on corporate deadlock is of particular importance. If irreconcilable disagreements exist between participants, there are insufficient votes to adopt a decision, and it is impossible to reach agreement on issues of company management, the conflict is resolved through court proceedings or, if provided by the constituent documents, through mediation or arbitration.

This approach reflects a modern trend in corporate law: a conflict between participants is recognized not only as a private dispute but also as a factor capable of paralyzing the activities of a legal entity.

Protection of Minority Participants Upon Acquisition of Control

The Law contains a special guarantee for minority participants when control arises. A person who has become the owner of 50 percent or more of the share in the charter capital of the company is obliged, within 15 days, to offer minority participants to sell their shares to him at market value, if that person previously did not own shares or owned less than 50 percent. If, within 30 days, a participant gives written consent to sell his share, the owner of 50 percent or more is obliged to purchase it.

This structure is an important novelty for the protection of minority participants. Its essence is that the acquisition of control changes the balance of power within the company. A minority participant may not wish to remain in a company where control has passed to a new person. Therefore, the Law gives him an opportunity to exit by selling his share at market value.

At the same time, the majority participant’s obligation to purchase the share arises only if the minority participant gives written consent. Accordingly, the minority participant retains a choice: to remain in the company or to exercise the right to sell the share.

Major Transactions and Related-Party Transactions as a Risk Area

Abuse of majority control often manifests itself through asset stripping, entering into transactions with interested persons, or redistributing economic benefits within a group of related persons. The new law provides special rules for major transactions and transactions with affiliated persons.

A major transaction is a transaction or several interrelated transactions connected with the acquisition, alienation, or possibility of alienation by the company of property whose value exceeds 25 percent of the value of the company’s net assets. A decision to enter into a major transaction is adopted by the general meeting of participants. A major transaction concluded in violation of the requirements of the Law may be declared invalid by a court upon a claim by the company or its participant.

Transactions with affiliated persons are also subject to special control. An affiliated person may not participate in the discussion and voting on the relevant transaction. If the value of a transaction with an affiliated person amounts to 10 percent or more of the value of the company’s net assets, the decision is adopted taking into account the market value of the property determined by an appraisal organization and after the terms of the transaction have been reviewed by an independent external audit organization.

In addition, participants have the right to challenge a transaction with an affiliated person if they disagree with the decision approving the transaction or if the participant did not take part in adopting the decision. Upon the request of a participant, the executive body is obliged to provide information and documents on such transaction within three business days.

These provisions significantly strengthen the protection of minority participants, since they allow control over transactions in which the majority participant or persons related to him may have a personal interest.

Control Mechanisms and Audit of the Company’s Activities

Internal control is an important instrument for protecting participants. The company’s charter may provide for the establishment of an audit commission or the election of an auditor. The functions of the audit commission may be transferred to an independent audit organization that has no property interests with the company, its management bodies, or participants.

An audit of the company’s financial and economic activities is conducted based on the results of the year or another period at the initiative of the audit commission, by decision of the general meeting, the supervisory board, or upon the request of participants holding in aggregate not less than one-tenth of the total number of votes.

Thus, the 10-percent threshold becomes an important instrument of minority control. Even if a participant or group of participants is unable to determine the company’s decisions, they may initiate an audit of the financial and economic activities.

Liability of the Majority Participant and Limits of Corporate Power

Limited liability of participants is a basic principle of an LLC: participants are not liable for the obligations of the company, and the company is not liable for the obligations of its participants. However, this principle is not absolute. If the company’s insolvency arose as a result of unlawful actions of the director, collegial executive body, member of the supervisory board, participant of the company, or a person entitled to give mandatory instructions to the company, such person may be held subsidiarily liable. If harm is caused by several persons, they bear joint and several liability.

This provision is of particular importance in relation to majority participants. A person who actually determines the company’s decisions must not use the corporate form as a means of avoiding liability. If control is used unlawfully and leads to the company’s insolvency, the majority participant may face subsidiary liability.

Corporate Agreement as a Means of Balancing Interests

The Law expressly provides for the right of participants to conclude a corporate agreement on the exercise of their rights. For relations between majority and minority participants, a corporate agreement may be of key importance.

It is advisable to regulate in such an agreement: the voting procedure on key matters; a list of decisions requiring the consent of the minority participant; the pre-emptive purchase right; prohibition of dilution of the share; conditions for withdrawal from the company; the procedure for valuation of the share; deadlock mechanisms; dispute resolution procedure; confidentiality; and liability for breach of arrangements.

A corporate agreement makes it possible to turn an abstract balance of interests into a concrete system of contractual obligations. For minority participants, it is a way to obtain additional guarantees, while for majority participants it ensures predictability of management and reduces the risk of corporate conflicts.

Differences Between Majority and Minority Participants of an LLC

No.	Criterion	Majority participant	Minority participant
1	Main feature	A participant holding a controlling or significant share, usually more than 50% of the votes.	A participant holding a smaller share and unable to independently determine the company’s decisions.
2	Corporate influence	May effectively determine the company’s position on most ordinary matters.	Participates in management but usually cannot adopt decisions alone.
3	Control over the general meeting	With a share of more than 50%, may control decisions adopted by simple majority.	May vote, propose matters, and participate in discussions, but his vote is not decisive.
4	Qualified majority	With a share of 2/3 or more, may adopt decisions requiring a qualified majority, unless the charter establishes a higher threshold. For example, an increase of charter capital requires not less than 2/3 of the votes.	If holding more than 1/3 of the votes, may block decisions requiring 2/3 of the votes.
5	Matters requiring unanimity	Even a majority participant cannot adopt decisions alone if the law or charter requires unanimity of all participants.	Has the right to block decisions requiring unanimity, regardless of the size of the share.
6	Right to profit	Receives a larger portion of distributed profit in proportion to his share.	Receives a smaller portion of profit in proportion to his share.
7	Access to information	Has the right to receive information and review the company’s financial statements.	Has the same right to information and financial statements, which is especially important for monitoring the actions of the majority participant.
8	Ability to influence the executive body	Most often may ensure the appointment or termination of powers of the director if the decision is adopted by a majority of votes.	Usually cannot independently appoint or replace the director, but may challenge unlawful decisions.
9	Risk of abuse	May use control to adopt decisions in his own interests, for example in relation to profits, management, or transactions with assets.	The main risk is exclusion from management, refusal to provide information, dilution of the share, and adoption of decisions without regard to his interests.
10	Protection upon acquisition of control	A person who has become the owner of 50% or more of the share is obliged to offer minority participants to sell their shares to him at market value; upon written consent of the minority participant, such person is obliged to purchase the share.	Receives a special right to sell his share to the new controlling participant at market value.
11	Exclusion of another participant	If holding not less than 10% of the share, a participant or group of participants may demand in court the exclusion of a participant who violates obligations or impedes the company’s activities.	Minority participants holding in aggregate not less than 10% may also use this mechanism against an unfair participant, including the majority participant.
12	Audit of financial and economic activities	May initiate an audit through the general meeting or through company bodies under his control.	Participants holding in aggregate not less than 1/10 of the votes have the right to demand an audit of the company’s financial and economic activities.
13	Alienation of a share	May sell the share, but must comply with the pre-emptive purchase right of other participants and the company.	Has the same right to sell the share; when another participant sells a share, enjoys the pre-emptive purchase right over third parties.
14	Withdrawal from the company	May withdraw from the company if this is provided by law and the constituent documents.	Has the same right of withdrawal, which may be an important method of protection in a conflict with the majority.
15	Corporate agreement	May use a corporate agreement to establish the voting procedure and control.	May use a corporate agreement to obtain additional guarantees: veto rights, prohibition of dilution of the share, procedure for valuation of the share, and withdrawal.
16	Liability	If the majority participant actually gives mandatory instructions or unlawfully influences the company’s activities, subsidiary liability may arise in case of insolvency.	Usually bears risk only within the limits of the contribution, unless he commits unlawful actions and does not influence the company in bad faith.
17	Practical role	A controlling participant who determines the strategy, management, and key decisions of the company.	An investor-participant or partner with limited influence who needs special protective mechanisms.