Zen Inc. owns 35% of Sun Inc.'s voting shares. Zen is by far the largest single shareholder of Sun Inc.'s shares, with the rest of Sun's shares being very widely held by individual investors. There was a very poor turnout at Sun Inc.'s recent annual meeting, enabling Zen Inc. to elect the majority of Sun's Board of Directors. Does Zen control Sun under IFRS?

Question

Quizplus · Accepted Answer

According to IFRS, control can be achieved either through ownership of a majority of the voting rights, or through the ability to influence the direction and management of an entity. Zen Inc. has achieved control of Sun Inc. by electing a majority of the board members, even though it only owns 35% of the voting shares. The low turnout at the annual meeting also indicates that the other shareholders are not organized in a way to actively cooperate when they vote, further strengthening Zen's influence over Sun. Therefore, under IFRS, Zen is deemed to control Sun.

Zen Inc Owns 35% of Sun Inc