Joe Coyle is the managing director of Easter Feast Ltd (Easter Feast), a food and beverage chain located in Singapore. The company is looking to expand its business and exploring the possibility of acquiring Winter Delight Pte Ltd (Winter Delight). The latter had been facing financial difficulties due to reduced sales attributed to the pandemic. Easter Feasts financial controller proposed that the company take a 30% stake in Winter Delight.

Some members of Easter Feasts management team noted that Winter Delight has a large bank loan balance owing to KWC Bank (KWC). The loan contract has a clause that requires Winter Delight seek approval from KWC for purchases above $1,000 should Winter Delight default on any loan repayments. Joe is worried that this means KWC has control over Winter Delight even after the acquisition by Easter Feast. Advise Joe if his concern is warranted and should be addressed. (Since the bank is a lender and not an investor, would this still be a protective right? Or would it be a loan covenant, or something else?)

(4 marks)