Problem 12-1S SOLUTION (a) Joan controls A Ltd. Therefore, Joan controls 55% of the votes (30% directly and 25% indirectly) of B Ltd. The companies are associated by par. 256(1)( b ), as both are controlled by the same person. A Ltd. and B Ltd. are also associated by par. 256(1)( d ). Joan controls A Ltd. The related group of Joan and A Ltd. control B Ltd. In respect of each corporation, Joan owns at least 25% of the shares. (b) A Ltd. and B Ltd. are not associated as the 25% cross-ownership test is not met as the preference shares are "shares of a specified class" as defined in ssec. 256(1.1). That is, they are non-voting shares which have a fixed dividend rate (8%) which does not exceed the prescribed rate in effect at the time the shares were issued (10%) and the amount which can be received on redemption is equal to the consideration paid for the shares. John may be in a position to control B Ltd. by ownership of the preference shares. If the financing provided by John is critical to B Ltd. and, if B Ltd. is unable to replace it
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This note was uploaded on 03/24/2012 for the course ACCOUNTING IAF841 taught by Professor Ganesh during the Spring '12 term at Seneca.