Case study on Consolidation: Controlled Entities: Ram Lal 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% 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:

Discuss whether the following investor companies have the current ability to direct the

relevant activities of Ram Lal Co. Give reasons to support your answer.

a) Krisna Lal Co holds majority of the voting rights in Ram LalCo

(2 marks)

b) Shyam Lal Co holds a substantive option to acquire majority of shares in

Ram Lal Co that is exercisable in 25 days and is deeply out of money.

(2 marks)

c) Shiu Lal Co is party to a forward contract to acquire majority of shares in

Ram Lal Co. The forward contract’s settlement date is in 25 days.

(3 marks)

d) Mohan Lal Co is party to a forward contract to acquire majority of shares in

Ram Lal Co, with no other related rights over Ram Lal Co. The forward

contract’s settlement date is in six months. (3 marks)​