A stake in an entity that constitutes less than 50% of the total shares that are controlled by voting rights. In other words, non-controlling investors cannot exercise control over an entity by way of votes, and therefor have very limited or no influence on the decision-making and management of that entity. Normally, non-controlling interest stakes range between 20% and 30%. In the books of an entity, non-controlling interest is projected as part of consolidated profit and loss that comes under ordinary operations after taxation. Under international accounting norms, the non-controlling interest falls under equity.

On the statement of financial position, non-controlling interest appears as a separate line item, in order for the users of financial statements to have an idea about the controlling interests (majority interest) in the parent company.

Non-controlling interest is usually classified as active non-controlling interest or passive non-controlling interest. In passive interest, the non-controlling stake usually doesn’t exceed 20%, in which case a entity cannot exercise any influence over the other. On the other hand, the stake of an active interest ranges between 21% and 49%, and an entity with such active interest would have voting rights whereby it can influence the other entity.

Non-controlling interest is also known as a minority interest (as opposed to a majority interest).