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E Ltd. holds 25% of an investee; three other investors each hold 25%. Decisions about financial and operating policies are made by majority. The other three investors consistently outvote E's proposals. Does E have significant influence?
AYes — 25% > 20% threshold
BNo — although E holds 25%, the persistent outvoting demonstrates E cannot participate in policy decisions, rebutting the presumption
CYes, and joint control as well
DYes, but only if E has board representation
Answer & Solution
Correct answer: B. No — although E holds 25%, the persistent outvoting demonstrates E cannot participate in policy decisions, rebutting the presumption
The 20% presumption can be rebutted by 'clear evidence'. Here the persistent outvoting demonstrates E lacks ability to participate — so significant influence does not exist despite the 25% holding.
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