- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Formatt also holds 49·1% of Protect’s voting shares and accounts for Protect as an associate. Protect has 20 other
shareholders, the largest of which has a shareholding of 20% and the smallest a holding of 1% of the voting
shares. The shareholders have an agreement which gives the largest shareholder a right of first refusal if one of
them wishes to sell its shareholding in Protect. The management committee of Protect consisted of six members
of whom four were representatives of Formatt. There has not been complete shareholder representation at the last
four annual general meetings of Protect.
The directors of Formatt wish to know how to account for Font and Protect in the financial statements for the year
ended 30 November 2017. (8 marks)I can umderstand here that formatt does not hold majority of the shares of protect but still it is accounting for it as subsidiary how ?protect has The second highest shreholding of 20 % and smallest holding of 1% . Cannot understand this and also the shareholders have an agreement which gives the largest shareholder a right of first refusal if one of them wishes to sell its shareholding in protect please explain these points thanks
Hi,
We don’t need to have greater than 50% to have control. It is about the power to direct the activities of the entity.
Given that we have four of the six members of management, and that there hasn’t been full representation at the last AGMs then we will have the power to appoint/remove the directors through casting of the votes at the AGM. This will therefore give us control over the entity.
If other shareholders want to sell their shares as part of an attempt to buy the entity and seek control, then we can refuse to sell ours and therefore still hold 49.1% and with the above regarding the voting, we still have control.
Thanks
- You must be logged in to reply to this topic.