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Controlling Interest

Also known as: Majority Stake, Controlling Shareholding

Definition

Controlling interest is the ownership of enough shares in a company—typically more than 50% of voting shares—to control major business decisions and determine the company's direction.

Understanding controlling interest is crucial for business owners planning their estate, as how this shareholding passes on death can determine whether a family business continues smoothly or faces deadlock and potential failure.

What Does Controlling Interest Mean?

Under English and Welsh law, controlling interest typically means owning more than 50% of a company's voting shares. The Companies Act 2006 gives shareholders with this level of ownership the power to pass ordinary resolutions (requiring a simple majority under Section 282), including removing directors (Section 168) and making key operational decisions. The Corporation Tax Act 2010 Section 1124 defines control as the power to secure that a company's affairs are conducted according to one's wishes through holding shares or voting power.

What matters most is voting power, not ownership percentage. Someone with 55% of voting shares has controlling interest, while someone with 60% of non-voting shares does not. Sarah owns 65% of voting shares in her family's printing company worth £850,000—this lets her appoint directors and set strategy without her brother's consent. However, special resolutions require 75% approval, meaning shareholders with 25%+ can block fundamental changes like altering the articles of association.

Effective controlling interest can exist below 50% if other shareholders are widely dispersed. Conversely, a 50-50 split creates deadlock, as neither shareholder has control. Shareholders' agreements can modify standard rules through enhanced voting rights or drag-along provisions.

For estate planning, controlling interest has significant implications. Business Property Relief provides 100% inheritance tax relief on the first £1 million of qualifying business assets from April 2026, with 50% relief above this threshold. Controlling interest shares in trading businesses typically qualify for BPR. Additionally, these shares are valued 20-45% higher than minority shares due to the control premium, increasing the estate's IHT liability.

Common Questions

"How much ownership do you need to have a controlling interest?" You typically need more than 50% of a company's voting shares. However, you can sometimes have effective control with less if other shareholders are widely dispersed or your shares carry enhanced voting rights. The key is voting power, not ownership percentage.

"Does controlling interest affect inheritance tax on business shares?" Yes, significantly. Since April 2026, the first £1 million of qualifying business assets receives 100% IHT relief, with 50% relief above this. A controlling interest may qualify for different BPR treatment than minority holdings in private limited companies.

"What happens to a controlling interest when the shareholder dies?" The shares pass according to the will or intestacy rules. Splitting controlling interest among multiple beneficiaries can create deadlock. Business owners should use succession planning strategies like shareholders' agreements or trusts to maintain continuity.

Common Misconceptions

Myth: You must own at least 51% of all shares to have a controlling interest.

Reality: Controlling interest requires owning more than 50% of voting shares, not all shares. You could own 51% of total shares but lack controlling interest if many are non-voting. Conversely, enhanced voting rights shares mean you can have controlling interest with far less than 50% ownership.

Myth: If you have a controlling interest, you can do whatever you want with the company.

Reality: Controlling interest allows you to pass ordinary resolutions and remove directors, but you cannot unilaterally make major decisions. Special resolutions (requiring 75% under Companies Act 2006 Section 283) are needed to change the articles, wind up the company, or make fundamental changes. Controlling shareholders also owe fiduciary duties and can face claims for oppression under Section 994.

  • Company Shares: The broader category—controlling interest is a specific type defined by voting power.
  • Minority Shareholder: Shareholders lacking the voting power to control the company or pass ordinary resolutions.
  • Shareholders' Agreement: Contractual arrangements that can modify or restrict powers that come with controlling interest.
  • Business Valuation: Controlling interest shares are valued 20-45% higher than minority shares due to control premium.
  • Drag-Along Rights: Provisions allowing controlling shareholders to force minority shareholders to accept sale offers.

Need Help with Your Will?

Planning the succession of your controlling interest is essential for business continuity and minimizing inheritance tax. Understanding how your shares will pass ensures your business survives and your beneficiaries don't face deadlock.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.