What is a majority interest? Definition and example
When somebody has a majority interest, it means that they own at least 51% of all the shares of a company. We also call it a controling interest or majority ownership. The term may apply to a person, group of people, company, or any entity that has a controling interest in a company. In some cases, the entity might be the government.
Somebody who has a majority interest is a majority shareholder or majority stockholder. They have a controling share.
Whoever has the majority interest has more power in that company than all the other stockholders combined. Stockholder means the same as shareholder.
In our article – What is A Majority Shareholder? – we wrote:
“An individual with a majority interest is usually the founder of the company, or a descendant of the founder if it is a long-established business. Controlling shareholders are more common in private companies than public companies.”
How do those with a majority interest manage a company?
How people, groups, or companies with a controling interest manage a company varies significantly. Some are actively involved in the business’ everyday activities. Others, on the other hand, chose a more hands-off approach. In other words, they leave its management to others.
A corporate raider will typically find it much more difficult to acquire a company if its majority shareholder is not interested. If one entity controls a company, it is not possible to take the ‘divide and conquer’ approach. A corporate raider, or predatory company, is one that seeks to acquire another company.
Controling interest may be below 51%
It is not always that case that the person with a majority interest owns 51% or more of the shares.
If a company has, for example, 10,000 shares and you are the owner of 5,001 of them, you are a majority shareholder. However, in percentage terms, you only own 50.01% of the company.
Therefore, technically, it would be more accurate to say that to have a controling interest, the person must own at least 50% of all shares plus one share.
The Cambridge Dictionary has the following definition of the term:
“A situation in which one person or organization owns more shares in a company than any other shareholder, and enough to be in control of the company.”
World’s richest people – most don’t have majority interest
Most of the world’s wealthiest individuals no longer have a controling interest in the businesses they founded.
Warren Buffet, one of the world’s richest people, owns 32.4% of Berkshire Hathaways’ common stock. Therefore, he is not a majority shareholder.
Bill Gates, the second-richest person in the world, now owns just 1.3% of Microsoft, the company he founded. In 1996 he owned 24% of the company.
Spanish multi-billionaire Amancio Ortega, on the other hand, owns 59% of the Spanish multinational clothing giant Industria de Diseño Textil, S.A. (Inditex). Ortega still owns a majority interest in the company.