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maam what makes potential voting rights substantive? I mean when the investor has 40% stake and has option to purchase further shares, so in such a case when deciding upon “substantiveness” of potential options what do we look for?
In order for a potential voting right to be substantive, it must be exercisable when decisions about the direction of the relevant activities need to be made. Usually, to be substantive, the rights need to be currently exercisable.
A potential voting right is more likely to be substantive when it is in the money (i.e. the option price is favourable compared to prevailing market price).
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