What is the definition of 'Controlling Interest' in a Red Wagon Club RWC Business transfer?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
For purposes of this Agreement, a "Controlling Interest" means:
(1) if Franchisee is a corporation, such number of the voting shares of Franchisee as (a) shall permit voting control of Franchisee on any issue and (b) shall prevent any other person, group, combination, or entity from blocking voting control on any issue or exercising any veto power;
(2) if Franchisee is a general partnership, a managing partnership interest or such percentage of the general partnership interests in Franchisee as (a) shall permit determination of the outcome on any issue and (b) shall prevent any other person, group, combination, or entity from blocking voting control on any issue or exercising any veto power;
(3) if Franchisee is a limited partnership, a general partnership interest; or
(4) if Franchisee is a limited liability company, such percentage of the membership interests as (a) shall permit determination of the outcome on any issue and (b) shall prevent any other person, group, combination or entity from blocking voting control on any issue or exercising any veto power.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2024 FDD)
According to Red Wagon Club's 2024 Franchise Disclosure Document, a 'Controlling Interest' is defined differently based on the franchisee's business structure. If the franchisee is a corporation, a controlling interest means the number of voting shares that allows voting control on any issue while preventing any other entity from blocking that control or exercising veto power.
For a general partnership, a controlling interest is a managing partnership interest or a percentage of the general partnership interests that allows determination of the outcome on any issue, again preventing others from blocking control or using veto power. If the franchisee is a limited partnership, a general partnership interest constitutes a controlling interest.
Finally, if the franchisee is a limited liability company, a controlling interest is the percentage of membership interests that permits determining the outcome on any issue and prevents any other entity from blocking voting control or exercising veto power. In all cases, the definition focuses on the ability to unilaterally control decisions without obstruction from other parties.