Question

On July 1, 2016, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions.

Answer 1

Answer:

In order to significantly influence the decisions Killearn Company has to have 51% shareholding of Shaun company. This 51% shareholding significantly increases the voting rights and gives a controlling position.

Explanation:

Holding majority shares of the company i.e 51% imparts voting rights to shareholders and increases their influence in making key decisions like appointment of CEO, appointment of auditors etc.

In the case mentioned Killearn is having 25% holding which results in having a minority interest and not a controlling position.

However in scenarios where 2/3rd majority is required minority shareholders like Killearn can be consulted.

Minority shareholders can be consulted and have a position in the board of directors.