An entity that has a limited number of shareholders (such as 3 or 5 people). The stock of such an entity (a closely-held share) is often listed on public exchanges or over-the-counter (OTC) venues, but it doesn’t trade as frequently as the shares of publicly held entities. By constitution, a closely held entity doesn’t make its stock available to outsiders. The owners of such an entity have all voting rights, and as a result control, in their hands. A closely held entity may also be an entity that is held by a few number of shareholders who own the majority of its shares.
The registration/ incorporation/ listing requirements for such an entity differs from those imposed on publicly or privately held entities.
The main features of a closely held entity include:
- Limited number of shareholders;
- Limited number of shares;
- Informal operating structure;
- Shareholders/ owners run and operate the business; and
- Decision-making is handled by owners.
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