Reference no: EM132904209

Consolidation: Controlled Entities.

Ram Gopal Co is an investee company which has annual general meetings where decisions to direct the relevant activities are made. The next scheduled annual general meeting is in eight months. However, shareholders that individually or collectively hold at least 5 per cent of the voting rights can call a special meeting to change the existing policies over the relevant activities, but a requirement to give notice to the other shareholders means that such a meeting cannot be held for at least 30 days. Policies over the relevant activities can be changed only at special or scheduled annual general meetings.

Required:

Problem 1: Discuss whether the following investor companies have the current ability to direct the relevant activities of Ram Gopal Co. Give reasons to support your answer.

(a) Krisn Gopal Co holds majority of the voting rights in Ram Gopal Co

(b) Shyam Gopal Co holds a substantive option to acquire majority of shares in Ram Gopal Co that is exercisable in 25 days and is deeply out of money.

(c) Shiu Gopal Co is party to a forward contract to acquire majority of shares in Ram Gopal Co. The forward contract's settlement date is in 25 days.

(d) Mohan Gopal Co is party to a forward contract to acquire majority of shares in Ram Gopal Co, with no other related rights over Ram Gopal Co. The forward contract's settlement date is in six months.