Majority stake deals: why buyers take 51% now and the rest later

A majority stake acquisition means a buyer purchases more than 50% of a company's shares or voting rights, but not all of them. The seller side, usually the founders and early investors, keeps the rest. The buyer then controls the board and key decisions, while the sellers remain part owners.

The most common size is 51%, because it is the smallest holding that gives a clear majority. Under the Companies Act 2013, a simple majority passes ordinary resolutions, and 75% is needed for special resolutions. So a 51% buyer can run the company day to day but may still need other shareholders for the biggest changes, such as altering the articles of association.

In Indian startup news this shows up as a large company buying into a smaller brand. A recent live case: Marico signed agreements to take 51% of Bonorizon Consumer Ventures by subscribing to new shares for up to ₹35 crore, with the right to buy the rest later if milestones are met.

There are four usual reasons. Each one protects the buyer from paying full price for something that may not grow as promised.

The first is risk. If the brand misses its targets, the buyer has paid for only part of it. The second is incentive. Founders who still own shares have a reason to keep working hard. The third is cash. The buyer spends less on day one, and the second payment depends on results. The fourth is ease of closing, since a partial deal can be simpler to agree than a full takeover, though competition and foreign investment rules can still apply.

• Control: more than half of the votes, so the buyer decides on budgets, hiring and strategy.
• Lower upfront cost: only the first slice is paid for now.
• Founder retention: sellers who keep a stake stay motivated.
• Price discovery: the later price can be tied to actual performance.

Most deals follow the same shape. The buyer and the founders sign a share subscription or share purchase agreement and a shareholders' agreement. The first agreement says how the first stake is bought. The second sets the rules of the relationship after closing.

In a subscription, the company issues new shares to the buyer, so the money goes into the company and is used to grow it. In a purchase, existing shareholders sell shares and the money goes to them. Many deals combine both, with part of the buyer's cash going into the company and part to the sellers.

The size of each part matters to the founders. Money that goes into the company dilutes everyone, including the buyer's own stake after closing, while money paid to sellers is personal income to them and may be taxed. Tax treatment depends on the structure and the sellers' status, so it needs professional advice.

• Signing: the parties agree the price, conditions and the rest-of-stake terms.
• Conditions: approvals, due diligence results and any required filings are completed.
• Closing: shares are issued or transferred and the buyer takes board seats.
• Later step: the buyer or the founders may exercise an option to trade the remaining shares.

A call option is the buyer's right, but not duty, to purchase the remaining shares at a price set by a formula or milestone. A put option is the opposite: the founders' right to sell their remaining shares to the buyer. Both are written into the shareholders' agreement.

The price is usually tied to a measure such as revenue or profit in a future year, multiplied by an agreed figure. This is how a buyer ends up paying more if the business does well and less if it does not. These clauses are sometimes called earn-outs when the extra payment depends on results.

The Indian Contract Act 1872 governs these agreements as contracts. If a non-resident investor is involved, the Foreign Exchange Management (Non-debt Instruments) Rules 2019 allow options, but with limits: as of November 2026, the equity must stay locked in for a minimum period, and the option must not promise the foreign investor an assured return or fixed exit price. The rules are under review, so the current text matters.

Founders keep their remaining shares, and usually their jobs, at least for a period. The agreement normally includes a lock-in so they cannot sell to someone else, and a non-compete so they cannot start a rival.

They often give up some rights. The buyer may get the power to appoint most directors, approve the annual budget and decide on new fundraising. Founders usually keep a few protective rights, such as being consulted on changes that affect their remaining shares.

If the founders also hold a put option, they have a way out later at a price tied to results. If they do not, the buyer's call option may be the only route to selling, so the terms around timing and price are worth reading closely.

A full acquisition transfers all or nearly all shares, and the founders usually leave or take a smaller role. A majority stake deal keeps them involved. A funding round also brings in new shares, but investors usually take a minority share and do not control the company.

The difference with a strategic majority deal is intent. A financial investor expects to exit through a listing or sale. A strategic buyer, such as a consumer company buying a younger brand, plans to fold the business into its own distribution and often to own all of it eventually.

• Funding round: minority stake, investors without control.
• Majority stake deal: buyer controls, founders stay invested.
• Full acquisition: buyer owns all or nearly all of the company.

Several regimes can apply, depending on who is buying and how large the deal is. The Competition Act 2002 (sections 5 and 6) requires approval from the Competition Commission of India when the deal or the parties' assets or turnover cross set thresholds; small deals can fall below them. The thresholds are revised from time to time, so check the current figures.

If the buyer is a listed company, it may need to tell the stock exchanges about the deal under listing rules. If the target is a listed company, the SEBI takeover regulations can force an open offer once a buyer crosses a set limit. If a foreign investor is on either side, the foreign exchange rules above apply, with pricing and reporting duties.

This guide describes the general position as of November 2026. A lawyer should check the specific deal.

Look at four things. First, whether the money goes to the company or to the sellers, since that changes how the company can use it. Second, whether the later purchase is an option or an obligation. Third, what the later price depends on. Fourth, whether the headline value is for the first stake or for the whole company.

A headline that reads 'X acquires 51% for ₹Y crore' does not say what the whole company is worth. Dividing the amount by the share can mislead if some of the money was new shares. Read the announcement for the exact terms, and remember that nothing here is legal, tax or investment advice; check with a professional.