Definition: Dominant influence

Category: Business registers

The dominant influence can be exercised in different ways. The acquisition of the absolute majority (50 % + 1) of shareholdings with voting rights is the main instrument used to take control over a legal unit. On the other hand the absolute majority of ownership of the capital share is neither a necessary nor a sufficient condition to have control.

It is not a necessary condition because there may be situations in which a relative majority of shareholdings with voting rights is enough to take control. This can be due to:

a) Absenteeism in the meetings from the part of the other shareholders.
b) Existing contracts about control.

It is not sufficient because the ability to effectively exercise control depends on the possibility to actively participate in the decision making process of the meeting. This may be limited by the presence of:

a) Shareholdings with limited voting rights;
b) Statutory provisions that limit the transferability of shares;
c) Temporary suspension of voting rights.

Situations vary very much from country to country and depend on the legal framework concerning the corporate government, i.e. the legislation that regulates the allocation of property rights and control of enterprises in the economy. In particular the principles vary sometimes notably between civil law systems and common law ones. http://ec.europa.eu/eurostat/ramon/statmanuals/files/KS-32-10-216-EN-C-EN.pdf