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Class Variation Rights(LW-GLO)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › Class Variation Rights(LW-GLO)

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by Vijay.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 1, 2021 at 6:42 pm #630068
    nomadd
    Member
    • Topics: 7
    • Replies: 5
    • ☆

    Q.)
    In 20X5 two newspaper companies, Kudos Co and Lux Co, entered into an agreement in an attempt to
    safeguard their independent positions. Under the agreement, Kudos Co purchased 20% of Lux Co’s
    preference shares which carry a preferred dividend of 10%.
    The board of directors of Lux Co have recently become disenchanted with their link with Kudos Co and want
    encourage Kudos Co to sell its preference share in the company. To do this, the board of Lux Co proposes a
    resolution to reduce the dividend on all preference shares to 5%.

    —————————————–

    Can Kudos Co prevent the reduction of the preference dividend and why?

    Why the Answer given in the kit for this question is “No – because it does not have enough votes to block the resolution or apply to the court for the variation to be cancelled”

    rather than “Yes – because it can demonstrate the variation is not for the benefit of the company as a whole”

    They already have the 20% share of that effected class and why cant they approach court for blocking this resolution?

    Thankyou

    August 2, 2021 at 11:48 pm #630193
    Vijay
    Member
    • Topics: 0
    • Replies: 258
    • ☆☆☆

    Hi,

    So in order to object to a variation of class rights you need to hold atleast 15% of that type of share being altered. In this scenario it is the Preferential Dividend shares which are being altered/varied. Kudos only hold 10% of the Preference Dividend and not 15%.

    I hope that clarifies.

    Kind regards,

    Vijay

    August 3, 2021 at 9:02 am #630228
    nomadd
    Member
    • Topics: 7
    • Replies: 5
    • ☆

    but in the question it mentioned ” Kudos Co purchased 20% of Lux Co’s”. how can it be 10%?

    August 23, 2021 at 11:56 pm #632678
    Vijay
    Member
    • Topics: 0
    • Replies: 258
    • ☆☆☆

    If you read the question carefully it in fact says 20 % of which 10% carries a preferred dividend!

  • Author
    Posts
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