A court, asked to dismiss a claim against Tesla Motors, found it reasonably conceivable that Elon Musk, a 22.1% shareholder, was a controlling shareholder because of his ‘actual domination and control over the directors’ wielding more power than may be evidenced by the minority shareholding.

Normally the courts of Delaware, where the case happened, would not find that control was exercised by such a low percentage shareholder. The courts require what is referred to as ‘additional, outsized control of the corporation’ if the shareholder owns less than 50%. The question is whether the independent directors can freely exercise their judgment.

No finding has yet been made on the factual issue whether Musk could actually rally other shareholders to bridge the gap between his 22.1% ownership stake and majority control and a willingness to use his power to control the board.

Although our insurance laws have a modest concept of control (it can be as little as 15%), there is always the overall test whether in fact a shareholder exercises control over the insurer.

[The case is In re Tesla Motors, Inc. Stockholder Litigation]