A form or situation of minority interest (non-controlling interest (NCI)) that involves, or arises from, holding of a minority stake by certain shareholders who do not actively take part in an entity’s management and decision-making. Passive or inactive minority shareholders do not have any special arrangement with the entity that may otherwise entail any active role such as a seat on the entity’s board of directors (BOD) or involves in specific areas or aspects of its activities or operations.
The minority stakeholders usually hold less than 20% of an entity ‘s stock, not with the minority shareholders not enjoying certain powers and/ or rights. Whereas, the majority stakeholders enjoy specific powers and/ or rights (e.g., make the major decisions for the entity).
Passive minority interest is usually held by investors who solely seek to get a financial return on their investment.
