Townsend Ltd. has the following shareholders: Palermo Co.-60%
Nix Ltd.-30%
Riley Ltd.-10%
Nix has two seats on Townsend's five-person board of directors. Which of the following statements is true?

Question

Quizplus · Accepted Answer

Nix's 30% ownership and two seats on the board give them significant influence over Townsend's decisions, but they do not have full control (which would require at least 50% ownership). Townsend is a separate entity and not a special purpose entity to Nix. Nix should not treat Townsend as a passive investment, as they have a significant ownership stake and board representation.

Townsend Ltd. Has the Following Shareholders: Palermo Co.-60