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These rights are more likely to be considered protective
since they appear to prohibit changes in the activities of the investee which Brazil Co does not agree with rather than give
Brazil Co power. Additionally, these are not rights which would allow Brazil Co to affect the profitability of Peru Co and
subsequently their return. Protective rights do not prevent Columbia Co from obtaining control.
A similar argument can be applied to the appointment of the senior managers. The entity which has the right to appoint
the majority of the senior management team is more likely to be the acquirer. Whilst each entity can appoint one senior
manager each, the rights of the senior management appointed by Brazil Co appear to be protective while all key decisions
are made by the senior manager appointed by Columbia Co. The rights of the senior manager appointed by Columbia
Co therefore appear substantive including requesting board approval for significant activities. They have the rights over
decisions affecting the key revenue earning capabilities of Peru Co including technological development, markets to
operate it and ways of raising finance. Thus Columbia Co has power over the investee and these rights enable them to
affect their return.
Further evidence that Columbia Co is the acquirer is reflected by the share issue which Columbia paid as additional
consideration. To obtain control, it is often the case that the acquirer has to pay a premium on acquisition for their equity
interests. Columbia Co has in effect had to pay additional consideration equal to despite each investor acquiring 50% of the equity shares. It can be concluded that Columbia is the acquirer in a
business combination and that Brazil Co, in effect, is the non-controlling interest.