Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Parent subsidiary shares percentage.
- This topic has 1 reply, 2 voices, and was last updated 6 years ago by MikeLittle.
- AuthorPosts
- November 29, 2017 at 9:05 pm #419004
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 Polly
A (i) only
B (i) and (ii) only
C (ii) and (iii) only
D All threeC is the right answer but how can potential convertible shares decide the parent relationship?
Also please correct me if i am wrong.The parent need to held at least 51% voting shares in the subsidiary right?November 30, 2017 at 12:05 am #419018Yes, you’re wrong! Since the introduction of IFRS 10 (?) there is now such a concept as effective control where, dependent upon the distribution of the remaining shares, a holding of, say, 25% could give effective control
Say no other shareholder owns more than .001% of the shares – the holder of 25% will likely be seen to have effective control
In addition, the holder of existing equity shares which are then able to be combined with further equity shares in the future on the event of conversion of, say, loan stock will again be seen to have control even though it is not yet actual indisputable control
No, it is not necessary for a parent to hold at least 51% of the voting shares in a subsidiary … technically the percentage is >50%
When the company Grand Metropolitan took over the brewing company Watney Mann, they did so after a LONG and hostile takeover battle that finished only when one shareholder eventually agreed to sell her 300 shares to Grand Met and that sale of 300 shares enabled Grand Met to claim that they now had control of 50.000001% of the Watney Mann shares
So your figure of “at least 51%” is not accurate enough
OK?
- AuthorPosts
- The topic ‘Parent subsidiary shares percentage.’ is closed to new replies.