A change of control occurs when a new entity takes over supreme authority in a company, which can happen through acquisition by a larger company, sale to new investors, or joint effort among shareholders. It can have positive or negative effects on employees and the community.
A change of control occurs when any entity that formally holds supreme authority within a company or corporation changes for any reason. As control is shifting within the company, it is common for mid-level executives to remain active and continue to oversee the core functions of the company. Once the change of control is complete, the new controlling entity can implement further changes in the corporate structure and function.
A change of control occurs when a company is sold and the new owners assume responsibility for the company’s operations. This can happen when a company is acquired by a larger company and becomes a subsidiary of the parent company. Upon acquisition, the parent company becomes the controlling entity. In other cases, the company is sold to a new set of investors, who are free to reorganize operations, sell parts of the business they own, or continue to run the company in the same way as the previous owners.
It is also possible for a change of control to occur as a result of a joint effort among the company’s shareholders. In the event that the majority of investors are dissatisfied with the performance of the current company executives, they can choose to unite and force the removal of the current management team. This process opens the door for new officials to come in and make the changes investors deem essential.
The business process of a change of control can be good for a company or it can be the beginning of the end. When investors acquire control of the interest with the goal of growing the company, a change of control can be very beneficial for most employees. However, when a change of control places people essentially wanting to break up the company and sell the assets, the action can translate into economic downturns for employees and the communities in which the company operates.
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