What is a Controlling Interest?

Malcolm Tatum
Malcolm Tatum
When a single entity owns more than half of the shares of a company's stock that is in circulation, it is referred to as controlling interest.
When a single entity owns more than half of the shares of a company's stock that is in circulation, it is referred to as controlling interest.

Controlling interest is a situation where one entity holds more than half of the voting shares of stock issued by a corporation. In general, it places the single entity in a position where, even if all other shareholders vote in opposition to a decision supported by the investor with a majority of voting shares, their collective strength will not be sufficient to alter the decision. In most cases, this situation is present when a single investor owns in excess of half of the shares of stock currently in circulation, although in other instances, it may require something more.

A two-thirds majority vote of shareholders may be required in order to approve decisions.
A two-thirds majority vote of shareholders may be required in order to approve decisions.

Depending on the articles of incorporation and bylaws of a given company, a two-thirds majority vote of shareholders may be required in order to approve a decision. If that is the case, an investor who owned just over half of the outstanding shares would not be able to control the outcome alone. He or she would require the support of at least enough of the other investors to achieve a two thirds vote in favor of the issue.

In one sense, controlling interest may also be present when a single investor owns at least 34% of the voting stock currently in circulation. This is true when a two-thirds majority vote is required to approve an issue that is put before the shareholders. Without winning the support of the single investor who controls 34% of the shares, there is no way to achieve that majority and the issue will be defeated. From this perspective, an investor can be considered both a minority investor and still have control, in that nothing is likely to pass without his or her support.

Having a controlling interest in a given company is a model that many corporations use to ensure that power remains in the hands of the founders or owners. The number and type of shares issued to other investors is carefully balanced with the number and type of voting shares retained by the owners, so that they always have a significant say in any decision that impacts the profitability of the company. In addition, maintaining this type of interest tends to keep the corporation safeguarded from corporate raiders who may try to take control and dismantle the company for profit.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including , and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including , and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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    • When a single entity owns more than half of the shares of a company's stock that is in circulation, it is referred to as controlling interest.
      By: Tupungato
      When a single entity owns more than half of the shares of a company's stock that is in circulation, it is referred to as controlling interest.
    • A two-thirds majority vote of shareholders may be required in order to approve decisions.
      By: endostock
      A two-thirds majority vote of shareholders may be required in order to approve decisions.