A stake or ownership interest in an entity that is large enough to dominate any stockholder’s motion and action. This is secured through control: owning of enough voting stock shares to influence operations and management’s decisions. A majority of voting shares always constitutes a controlling interest, either held by a single shareholder or a group of shareholders who act collectively and own the majority of voting rights. Typically, control is obtained by holding 51 percent or more of the voting stock, whereby legally controlling the entity.
For an entity to control another, a controlling interest in the latter has to be achieved, in which case the controlling entity and the controlled entity are known as a parent and subsidiary, respectively. This control necessitates the use the consolidated method of accounting for share purchase (preparation of consolidated financial statements).
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