Question 2 (25 marks) Part A Wealth Ltd is a bank in Hong Kong and Tech Ltd (Tech) is an information technology outsourcing company in India. Wealth and Tech has formed a new company called WeaTec, with the sole activity of providing IT services to Wealth on an outsourcing basis. The WeaTec is operating on the following arrangements: - Wealth Ltd owns 51 'class A' shares' and Tech owns 49 'class B' shares in WeaTec, representing 100% of each class - the two classes of shares with each confer one vote per share, such that Wealth holds 51% of the total votes - all residual profits or losses of the venture, and rights to receive more than the nominal value on liquidation, accrue to the 'class B' shares owned by Tech - Wealth pays for services received on the basis of a partly fixed fee, and a variable element that results in the sharing of operational efficiencies between Wealth and WeaTec - WeaTec's Board of Directors has 5 members, three appointed by Wealth and two by Tech. The Board controls most significant decisions, which are taken by simple majority vote. The CEO is nominated by Tech but reports to and functions under the direction of the Board - Most of the middle management staff of WeaTec are former employees of Tech who bring in their operational expertise - the service delivery management of the venture is the most relevant activity, and this is managed on a day-to-day basis by Tech under the overall oversight of the Board - operations of the venture are carried out on the premises of Tech Required: 1. Explain the term relevant activities. (2 marks) (50 to 60 words) 2. Explain which party/parties has/have rights or exposure to variable returns of WeaTec. (3 marks) ( 70 to 80 words) 3. Explain which party can control WeaTec. (5 marks) (80 to 100 words)