What Is a Controlling Interest?

The term controlling interest refers to a situation that arises when a shareholder or a group acting in kind holds the majority of a company's voting stock. Having a coꦕntrolling interest gives the holding entity(s) significant influence over any corporate actions. Shareholders who have a controlling interest are often able to direct the course of a company and make the most strateg🀅ic and operational decisions.

Understanding a Controlling Interest

A controlling interest is, by definition, at least 50% of the 澳洲幸运5官方开奖结果体彩网:outstanding shares of a given company plus one. However, a person or group can achieve a controlling interest with less than 50% owne🌺rship in a company if that person or group owns a 澳洲幸运5官方开奖结果体彩网:significa♌nt por🍨tion of its voting shares, as not🦩 every share carries a vote in shareholder meetings.

Having a controlling interest gives a 澳洲幸运5官方开奖结果体彩网:shareholder or group of shareholders significant influence over the actions of a company. A party can achieve a controlling interest as long as the o💝wnership stake in 🌱a company is proportionately substantial relative to the total voting stock.

With the majority of large public companies, for example, a shareholder with much less than 50% of the outstanding shares may still hav🅺e a lot of influence at the company. Sin💯gle shareholders with as little as 5% to 10% ownership can push for seats on the board or enact changes at shareholder meetings by publicly lobbying for them, giving them control.

Advantages of a Controlling Interest

The upside of holding a controlling interest in a company can come in many forms. First, a controlling interest gives a person or group of people substantial influence. Since, by definition, the party with controlling interest automatically has the majority vote, it allows an individual to veto or overturn decisions made by existing board members. This gives people wh♉o hav🐼e a controlling interest in a company the ability to t🦹ake ownership of the operational and strategic decision-making processes.

In some companies, if an individual has the controlling interest, the firm automatically makes that person the chair of the company's board of directors. This gives that individual even more power than the majority vote. In addition to retaining veto power over a board vote, the individual can effectively make board decisions on their own, including hiring 澳洲幸运5官方开奖结果体彩网:C-level executives.

A controlling interest grants an investor the leverage to increase their shareholding stake in a company in the event of a 澳洲幸运5官方开奖结果体彩网:merger or acquisition. For example, in a strategic merger that involves a 澳洲幸运5官方开奖结果体彩网:share swap, the investor who holds controlling intere🍌st would structure a deal that continues to give them majorit🍌y voting power over the new entity.

Real-World Example of a Controlling Interest

Meta (Formerly Facebook)

Facebook (now Meta) (META) founder and chief executive officer (CEO) 澳洲幸运5官方开奖结果体彩网:Mark Zuckerberg has a controlling interest in the social media giant. According to Facebook's 2021 proxy statement, Zuckerberg owns about 360 million Class B shares. He also maintains control on voting for another 32 million with a total voting power of 57.7%.

Alphabet

Google's parent company Alphabet (GOOGL) structured its shares in a similar way to Facebook. Larry Page, Sergey Brin, and Eric Schmidt each have a controlling interest, owning over 60% of the company’s B voting shares that carry 10 votes per share. In contrast, the tech titan’s Class A shares have only one vote per share, while the company's Class C (GOOG) shares have no voting rights.