What is a Controlled Company?

A controlled company is a business in which another entity owns a majority of the voting stock. More specifically, the owner must have at least 50% of the voting power for the election of directors. When a business is classified as a controlled company, it does not have to follow the public company rule requiring it to have a majority of independent directors, or to have independent nomination and compensation committees. In this situation, the company must disclose that it is relying on the controlled company governance exemption, state the governance standards with which it is not complying, and itemize the basis for taking the exemption.