Glossary

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Discount for Lack of Control

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Discount for Lack of Control (DLOC) is an amount or percentage deducted from the share of minor equity interest in a business to reflect the absence of some or all of the powers of control. In the absence of influence over decisions in the business, minority interest is deemed to suffer from the capacity to drive the business in a direction to benefit the minority shareholder. As a result, selling minority shares in a business is always a difficult proposition with the majority shareholder normally given the right of first refusal. The size of the control discount depends on the size of the minority and the disadvantages which go with it. For example, the discount that a business valuator will apply on a 40% minority will be different from a 25% minority. The higher the majority interest, the higher the minority discount and vice versa.

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