Page 25 - Finac2 Test 1 Slides - 1. Consolidated And Separate Financial Statements

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Illustration 5

• Z Ltd holds 40% of the voting rights in Y Ltd, whose relevant activities

are directed through voting rights. The remaining voting rights are

widely dispersed amongst shareholders who do not individually own
more than 1% of the voting rights.

• However, some of the shareholders with common interests have a

collective voting agreement in terms of which their votes are cast in
aggregate by a nominated representative. The aggregate of those

voting rights represents 52% of the voting rights in Y Ltd.

• Does Z Ltd have power over Y Ltd?

• The collective voting agreement warrants consideration of the voters it

represents as an organised group of voters
• The organised group of voters control 52% of the voting rights in Y Ltd

• Thus, they are able to prevent Z Ltd from directing the relevant activities of

Y Ltd
• Therefore, Z Ltd does not have power over Y Ltd, even though it is the

single largest shareholder

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