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What is a Controlled Company?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 24 September 2014
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    Conjecture Corporation
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Controlled companies are corporations where a majority of the voting shares of stock are held by an individual or another company. This level of holding effectively places the holder of the majority shares in a position to control the outcome of the voting on any shareholder issue. The exact degree of control, however, is determined by the terms of participation contained within the purchase agreements for the shares and the by-laws of the company proper.

There are many examples of controlled companies today. In some cases, the controlled company is structured as a holding company, with the controlling interest held as a means of evading a takeover attempt by a corporate raider. In other instances, the founder of the company may choose to sell just under half the interest in the company to other investors, while maintaining control of a majority share through the means of a separate corporate structure.

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Within the context of the voting share total that is held, there will be other factors that determine just how much company control the majority holder can exert. One factor has to do with what percentage of voting shares are needed to constitute enough support to affirm or deny a given issue put to the shareholders. In situations where the by-laws require a simple majority vote, a shareholder who possesses more than half the voting shares will clearly be able to determine the outcome. However, if the by-laws specify that a two-thirds majority is necessary to affirm or deny a given issue, and the majority holder only has slightly over half of the voting shares, he or she will often need additional support from other shareholders in order to control the outcome. At the same time, shareholders with fewer shares are certain to need the support of the majority shareholder in order to achieve their goals.

A controlled company tends to look like any other corporation to the general public. Examples of a controlled company can be found in just about every industry type, from retail to communications. As an ongoing viable business model, the controlled company has a long history and is likely to remain viable for the foreseeable future.

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