The Danger of 49%: Minority Ownership Red Flags

In export compliance, bright lines are rare. The "50 Percent Rule" is one of the few hard numbers we have: 50% or more ownership by a restricted party equals a block.

But what about 40%- Or 30%-

Many organizations treat the 50% line as a cliff. If the ownership sum is 49.9%, they approve the transaction. This is a dangerous practice that ignores explicit BIS guidance.

The "Significant Minority" Warning

The Bureau of Industry and Security (BIS) has repeatedly stated that "significant" ownership by a listed party - even if less than 50% - constitutes a Red Flag.

Why is it a risk-

Even with a minority stake, a restricted party might:

• Hold a board seat granting access to technical data.
• Have veto power over contracts.
• Use their influence to divert purchased goods to themselves.

Resolving the Red Flag

You don't necessarily have to block the deal, but you cannot auto-approve it. You must conduct enhanced due diligence.

New Recommendation: The 25% Threshold

At SecurePoint USA, we recommend setting a "Red Flag" trigger at 25% aggregate restricted ownership. This aligns with standard beneficial ownership reporting thresholds (like FinCEN's CTA rule) and provides a safety buffer.

Our new BIS 50 Rule Calculator includes this logic automatically. It calculates the strict 50% block and warns you if ownership hits the 25% due diligence zone.