QUESTION TWO [20] 2

A company is said to be a related party of other company only when it has

1. ownership, directly or indirectly of more than one half of the voting power of a company.
2. Control of the composition of the board of directors.
3. a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the enterprise.
4. exercise significant influence over the other party in making the financial and/or operating decisions.

2.1 In the given question company A owns 60% of company B and company B owns 30% of company C

company A owns more than 50% of company B hence company B will be a related party to company A.

company A owns indirectly 18% (60*30%) share in company C. company A does not have any cotrol or significant influence on company C.

2.2 In the given question company X owns 40% of company Y and company Y owns 30% of company Z.

company X will have control on the company Y since it was having significant influence over the company Y(significant influence may be exercised as an investing party holds, directly or indirectlythrough intermediaries 20% or more of the other company).

company X owns indirectly 12% (40*30%) share in company Z. company X does not have any cotrol or significant influence on company Z.