A control premium is the extra amount a buyer pays, above a share's strict pro-rata slice of total equity value, for the bundle of governance rights that come only with control — the power to appoint directors, approve a sale of the business, or force a fundamental change a minority holder cannot block.
Federal corporate law fixes exactly what a controlling block is buying. The Canada Business Corporations Act defines a "special resolution" as one "passed by a majority of not less than two-thirds of the votes cast… or signed by all the shareholders entitled to vote," and under s. 189(3) a sale, lease or exchange of all or substantially all of a corporation's property outside the ordinary course of business "requires the approval of the shareholders," with "each share… carr[ying] the right to vote in respect of a sale, lease or exchange… whether or not it otherwise carries the right to vote." A holder who can reach that two-thirds threshold alone can pass changes a 51% holder cannot — and that gap is exactly what a control premium is priced against.
A minority holder is not powerless, but its remedy runs through the courts rather than the boardroom: CBCA s. 241 lets a court, on a finding of conduct "oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder," order a wide range of relief including forcing the corporation or another shareholder to buy the complainant's shares. That is a remedy for mistreatment, not a pricing mechanism — it does not tell a buyer what a control block should cost going in.
No Canadian statute or regulator publishes a standard control-premium percentage. A Chartered Business Valuator who quantifies one weighs the specific rights being acquired — board control, the ability to clear a special resolution alone, access to cash flow and financing decisions — against the target's own governance structure and shareholder agreement, case by case.
A private company has 1,000 voting shares outstanding. A buyer already owns 550 (55%) and is negotiating to buy a further 120 shares (12%) from a second shareholder, which would take it to 670 shares — 67%, just over the two-thirds needed to pass a special resolution alone under CBCA s. 2(1). The 12% block is worth more to this particular buyer than its pro-rata 12% of equity value, because acquiring it converts a blocking minority position into unilateral control of every fundamental decision the corporation can make. The premium the buyer is willing to pay reflects that threshold, not just the extra slice of earnings.
See also: Minority discount · Discount for lack of marketability · Chartered Business Valuator (CBV).
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