Minority shareholders, is failure to secure a board seat always a loss?

Directors

I used to think board observer rights were simply a compromise for minority shareholders who do not have enough bargaining power to secure a board seat.

I recently came across a perspective that changed my mind.

For some investors with interests across various portfolio companies, board observer rights may actually be a better commercial fit than having the right to appoint a director.

A board seat gives a certain degree of control, but it also comes with:
·      fiduciary duties
·      governance responsibilities
·      potential conflicts of interest.

A board seat remains valuable when control is the objective.

For minority shareholders who want visibility into the business without taking on the same level of responsibility or exposure, observer rights may sometimes be sufficient.

This post was first posted on LinkedIn on 9 May 2026.

Linkedin Post
Earn-out: A postponed dispute?

An earn-out is often the solution when a buyer and seller cannot agree on price. The seller believes the business is worth more than what the buyer is willing to pay upfront. So, the parties resolve the issue by deferring the portion of the price they cannot agree on, with …

Linkedin Post
The disclosure letter: Why founders selling their companies should not treat it as an afterthought

When founders sell their companies, the scope of legal work usually focuses on the share sale and purchase agreement (SPA). The disclosure letter is sometimes treated as secondary to the SPA but it should not have been the case. The disclosure letter sets out the exceptions to the sellers’ representations …

Linkedin Post
Third-party consents in a share sale: What sellers should check before negotiating

When a company is sold, due diligence is usually conducted by the buyer, not the seller. That means the consents required from regulators, other shareholders, financiers or IP licensors to complete the sale are often only discovered when the buyer’s lawyers identify them during legal due diligence. By then, the …