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Effective Control or De facto Control
refers to the ability to direct a company's affairs while at the same time not possessing enough votes to constitute legal control.
eg. by way of contract, balance of ownership being small minority holdings, ability to obtain proxies, etc.
Legal Control or De jure Control
describes a shareholding of 50% plus one of the issued voting shares in a corporation.
eg. sufficient number of votes to elect the board of directors and thus control the direction of the corporations affairs.
under either legal or effective control. This definition has developed in connection with valuations made for income tax purposes. What must be proven is that some group of shareholders - perhaps related by kinship has acted in concert to direct the affairs of the enterprise.
Often exists when restrictions on shareholders right to sell shares independently and restrictions on their right to vote on group members shares independently.
occurs when two or more people agree to share control of a business. Where both own 50% equally, no one party has control of the business and both shareholders are in effect minority shareholders.
A potential acquirer may find 50% undesirable. Shareholders agreements can detail courses of action to be taken in the event of a stalemate between the two shareholders.
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