change of control
Definition
A change of control happens when ownership or decision-making power over a company shifts to a new person or group, typically through a sale, merger, or when someone acquires a large enough chunk of the company to call the shots. Most business contracts include a change of control clause because the other party signed an agreement with you specifically, and they want the right to opt out if a stranger suddenly takes over your company.
Example
If you sell your marketing agency to a private equity firm, your biggest client's contract might give them the right to walk away because the ownership of the company they originally trusted has fundamentally changed.
Watch Out
Before you sell your business or take on a major investor, review every contract you have for change of control clauses, because triggering them unexpectedly can cause key clients, vendors, or lenders to exit right when you need stability most.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.