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Electronics Ltd. is set up by R (60% voting) and S (40% voting). The articles say R and S each appoint 2 directors (board of 4); board decisions require simple majority. Is the entity jointly controlled?
AYes — but only if R waives voting rights at the AGM
BNo — R alone has majority voting rights so R controls
CYes — even though R holds 60% of votes, no single shareholder's directors can pass a decision without at least one director from the other side. Joint control via the board mechanism
DNo — only because S doesn't hold a majority
Answer & Solution
Correct answer: C. Yes — even though R holds 60% of votes, no single shareholder's directors can pass a decision without at least one director from the other side. Joint control via the board mechanism
Where decisions about relevant activities are made by the board on simple-majority basis and the board is 2+2, neither side's directors alone can pass anything. R's 60% shareholder vote does NOT translate into power over the relevant activities — so it is joint control. (Ind AS 111 illustration 6.)
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