You Own 70% and Control Nothing

Equity is a legal claim. Control is something else entirely.

Family offices structuring deals in complex markets usually take comfort in the math. They negotiate for 70%, 80%, sometimes 90% of the shares, leaving the local partner a minority stake just for his “skin in the game" They look at the cap table, see the majority and assume they're in charge of the asset.

They're not.

If you own 70% of a company but the local partner controls the bank signatory, the regulatory filings and the permits, your ownership is theoretical. The moment the relationship breaks down, you'll discover the truth: you're not a majority owner. You're an unsecured lender holding a piece of paper.

I watched this happen to an investor who held 70% of a venture and had put in all of the capital. One day the local side came to him with an urgent story about a regulatory change, KYC requirements, paperwork that needed to move fast. Under pressure and short on time, he signed. He later realized the documents he signed had handed over operational control and installed a new director, someone from their side. From there it was just a matter of time before money started moving out as "business expenses" to another entity, one that conveniently had debts of its own to cover. He still owned 70% of the company. He controlled none of it.

Why the Math Doesn't Hold

The failure comes down to one thing: in a developed market, if a partner underperforms or acts in bad faith, you fire them. You call a board meeting, use your voting rights and install someone new within days. The asset keeps running and equity does what it's supposed to do.

In a frontier market, there's no clean exit. Try to replace a local partner and you often find the building permits are registered to their brother. The utility contracts require a national ID only they have, and the workforce has an informal understanding with them that won't survive a change in ownership.

You own 70% of the bricks or the land. They own the right for the project to keep functioning at all. That's the trap, and they know it. They know that pushing them out means years in a local court, during which the asset's value collapses. So your 70% sits hostage to their day-to-day control.

Three Places This Breaks

When a deal like this goes bad, it's almost always one of three things:

1. The bank account - If the local partner is the only signatory, you have no real veto over anything. They can pad invoices, route money to companies they control or just say no. If you try to freeze the account from abroad, you'll learn fast that a foreign board resolution means nothing to a local bank branch without a local court order, which the partner can tie up in injunctions for months.

2. The permits - In most emerging markets, permits and licenses are the actual currency of doing business. If those are registered in the partner's name, or depend on them personally, they can threaten to pull the plug the moment you push back. You can fire them and keep your 70% of the company. The company just won't be allowed to operate tomorrow.

3. The information - If the only numbers you see are a monthly PDF the partner's own team prepared, you don't have oversight. You have their version of events. By the time a real problem shows up in that PDF, it's already too late to act.

What Actually Protects You

None of this means you avoid these markets. It means you build the deal differently from day one:

● Put someone independent, reporting only to you, on the ground. This is the person watching the operational side directly, not filtered through the local team.

● Require two signatures on any significant transfer, not one. If the local banking system can't support that, keep the treasury offshore and release funds to the local account in small, milestone-based amounts.

● Never let the local entity own the brand, the technology or anything else of real value. Hold it separately and license it in. That way if things go sideways, you have real leverage and not just a lawsuit.

● Put a mechanism in place before you ever wire money, not after: pre-signed resignation letters held in escrow, and a class of shares that gives you a hard veto on the decisions that matter (new debt, changing vendors and altering the business plan), regardless of who owns what percentage.

The Bottom Line

Owning a majority stake protects you in a market with a functioning legal system.

In a market without one, ownership only means something if you also control the money, the paperwork and the information.

The next time someone offers you 70% in exchange for "staying hands off", recognize what's actually being offered: the privilege of funding someone else's control.

If any of this sounds familiar, or you're structuring something now and want a second set of eyes on it, reach out. I'm happy to talk it through.