Posted in Finance, Accounting and Economics Terms, Total Reads: 750
Definition: Majority Interest
Majority Interest known as Controlling Interest, majority interest is a situation which arises when an individual or organisation owns more than 50% of total outstanding shares or voting shares. In such a situation, the party can introduce changes at the company level without being contested by any other shareholder and hence, is in control of the company.
In reality, even less than 50% of the shares can help achieve majority interest if the individual or organization holds a significant portion of the shares with voting rights. Also, not all 100% of the voting shareholder actively, so majority interest can be achieved even if less than 50% of the voting shares are held.
Example: If XYZ Corporation has 10,000 outstanding shares out of which 7,500 shares are voting shares, then controlling or majority interest can be achieved by buying 3,750 of the voting shares i.e. 50% of the voting shares, instead of buying 50% of the total shares. Suppose the stock price for XYZ is Rs. 20, then majority interest can be achieved for 3,750x2 = Rs. 7,500.