- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
In the above sceanrio question Dilemma – holds 35% voting rights of Myno, Aggresso takes over balance 65%. Dilemma continues to hold 35%. Aggresso replaces all three directors of Myno including the seat held by Dilemma.
ACCA answer says that Dilemma has lost significant influence and should treat the investment as equity investment.
Can the candidate presume that Dilemma has significant influence, just because aggresso has acquired 65% shares and removed director of 35% shareholder?
Dilemma may have legal rights to its representative in the Board as per company law and fight with aggresso to exercise its legal rights.
My doubt is that since it continues to hold 35% voting rights (means it can veto many decisions in Board Meeting), it has to continue to treat Myno under equity accounting or not?
The threshold of 20% or more is given because most corporate laws give certain rights to exert influence.
“Can the candidate presume that Dilemma has significant influence, just because aggresso has acquired 65% shares and removed director of 35% shareholder?”
The candidate must (normally) have assumed that 35% conferred significant influence (unless the contrary is shown) and clearly here the contrary is shown
“My doubt is that since it continues to hold 35% voting rights (means it can veto many decisions in Board Meeting)”
35% can prevent NO decisions in board meetings – especially because they have lost their representative on the board
What influence that may still possess is restricted to decisions at a general meeting and even then their power is limited to blocking special resolutions
“Dilemma may have legal rights to its representative in the Board as per company law and fight with aggresso to exercise its legal rights.”
Yes, that’s a possibility but there’s nothing in the question that you have given me to suggest that this is the case
“The threshold of 20% or more is given because most corporate laws give certain rights to exert influence.”
Where have you got that idea from??? It’s certainly a new one on me! If you had said “>25%” then I may have accepted the point but 20% …. no
- The topic ‘Dec 2015: Dilemma – holds 35% voting rights of- Aggresso takes over balance 65%.’ is closed to new replies.