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What is a Control Sale?

Published in Corporate Transaction Definition 2 mins read

A Control Sale refers specifically to a transaction involving the sale of a significant percentage of a company's shares by its existing shareholders to a buyer or group of buyers.

Based on the provided reference, a Control Sale is defined as:

Understanding the Definition of a Control Sale

A Control Sale is a specific type of transaction undertaken by existing owners (Shareholders) of a company's stock. It involves the transfer of a substantial portion of the company's ownership stake to a new party or related parties.

Here are the key components based on the definition:

Key Elements of a Control Sale

A transaction qualifies as a Control Sale if it meets the following criteria:

  • Parties Involved: The sale is conducted by one or more Shareholder(s) of the company.
  • Buyer: The shares are sold to any Person or group of related Persons.
  • Transaction Type: It can be a single transaction or a series of related transactions.
  • Threshold: The amount of Shares sold must meet one of two conditions:
    • Condition 1: Aggregating at least 30% of all Shares then outstanding.
    • Condition 2: Shares which, together with all other Shares theretofore sold to any such Person or... (The definition is incomplete here, but implies previous sales to the same buyer(s) contributing to a threshold).

In essence, a Control Sale signifies a transaction where enough shares are transferred to potentially shift or consolidate control of the company into the hands of the buyer(s), typically indicated by reaching or exceeding a specific ownership percentage threshold (like the 30% mentioned).

This definition is often found in legal agreements, such as shareholder agreements or investment documents, to define events that trigger specific rights or obligations among shareholders or the company.