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Sir
Germane has a number of relationships with other companies.In which of the following relationships is Germane necessarily the parent company?
(i) Foll has 50,000 non-voting and 100,000 voting equity shares in issue with each share receiving the same dividend. Germane owns all of Foll’s non-voting shares and 40,000 of its voting shares
(ii) Kipp has 1 million equity shares in issue of which Germane owns 40%. Germane also owns $800,000 out of $1 million 8% convertible loan notes issued by Kipp. These loan notes may be converted on the basis of 40 equity shares for each $100 of loan note, or they may be redeemed in cash at the option of the holder
(iii) Germane owns 49% of the equity shares in Polly and 52% of its non-redeemable
preference shares. As a result of these investments, Germane receives variable returns from Polly and has the ability to affect these returns through its power over PollyA (i) only
B (i) and (ii) only
C (ii) and (iii) only
D All three
Sir why (i) is not OK?Because Germane controls only 40% of the votes
In ii) although we have only 40% of the votes TODAY, Germane will get 32,000,000 out of the 40,000,000 new shares if all the loan note holders choose to convert into equity rather tha elect to receive cash
That would then give Germane 30,400,000 out of a total of 41,000,000 equity shares and therefore control
iii) the right to receive variable returns and the ability to affect those returns indicates effective control in the hands of Germane
Option i) does not make Germane the parent company whereas the other two options do
Ok?
so sir the parent need to control at least 50 % of VOTING rights ?
Thanks a lot. its clear nowIf you don’t control >50% of the votes, you don’t control the business at a general meeting of shareholders, so you don’t have a subsidiary!
Ok?
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