SBR syllabus
Control - Notes 4 / 5
Definition of a Subsidiary
"An entity that is controlled by another entity"
Criteria for Control
A parent (investor) only has control if it has all the following:
Power to direct the relevant activities
Eg.
Voting rights
Rights to appoint/remove key management
Decision-making rights via a management contract
Exposure, or rights, to the variable returns
Eg.
Dividends
Interest
Changes in value of investment
The ability to use its power to affect the amount of the investor's returns
An investor (the parent) only needs the current ability to direct the activities NOT necessarily directing them actively
If a parent controls one subsidiary, which in turn controls another. ...
The parent then controls both subsidiaries
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