A minority interest is a percentage of shares that are owned by a shareholder, who does not have the controlling authority over a company. This is a type of non-controlling interest that arises when a larger parent company has majority ownership of the company through a controlling interest, often 50% or more.

A company with a minority interest will generally have shares ranging between 20-30%, and even though the owner of these interests does not have controlling authority in the company, they do provide certain rights. These rights generally include an audit of the company’s financial statements and a right to higher profits that are distributed to shareholders in the form of dividends. Additionally, the minority interest may provide some protection and control over major decisions that require the approval of the parent company.

The company with a minority interest will generally have these interests listed on the consolidated balance sheet on the equity section. This will allow the parent company to show the holding in its own accounts, and clearly account for how much interest it has.

In many cases, the owner of the minority interest will be a small investor that does not possess a controlling interest in the company, but benefits from the financial returns of ownership. These returns can include portfolio diversification, corporate dividends, and capital appreciation. Minority interests can also be used as an investment strategy to gain exposure to a particular industry.

Despite these potential benefits, investing in a company held as a minority interest also has some drawbacks. Since the parent company holds a majority interest, and thus the controlling authority in the company, the minority shareholder may not be able to influence how the company operates. Additionally, since the company’s performance affects the value of the minority shareholder’s investment, the risk of losses is further increased for minority interest holders.

Overall, investing in a business held as a minority interest can provide some investment opportunities and possible returns, but it is important for investors to understand all of the associated risks and rewards. It is also important for the minority shareholder to understand the authority that the majority shareholder has, since it can impact the performance of the company and their investment as a whole.