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Big Ltd, Mid Ltd, and Small Ltd each own one-third of the ordinary shares issued by BMS Ltd. Each of the three shareholders of BMS
- Big Ltd, Mid Ltd, and Small Ltd each own one-third of the ordinary shares issued by BMS Ltd. Each of the three shareholders of BMS Ltd has the voting right to appoint two directors to the board of directors. Furthermore, Small Ltd also owns call options that are exercisable at a fixed price at any time. If Small Ltd exercises call options, then the voting rights of Small Ltd would increase to 55%. On the other hand, Big Ltd’s and Mid Ltd’s voting rights would become 22.5% each. However, the management of Small Ltd does not have any intention to exercise the call options.
- Determine whether or not control exists in this case and provide the reasons for your answers.
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Advanced Accounting
Authors: Gail Fayerman
1st Canadian Edition
9781118774113, 1118774116, 111803791X, 978-1118037911
