Power without a majority of votes

Learning objectives

• Explain that an investor without a majority can have power if it has the practical ability to direct the relevant activities unilaterally.L2, L3
• Assess, from the size and dispersion of holdings and from past voting patterns, whether power exists without a majority.L3

Normative references

• IFRS 10 §B41An investor with less than a majority of the voting rights has rights that are sufficient to give it power when it has the practical ability to direct the relevant activities unilaterally. The factors to be considered (in particular the relative size of the holding and the dispersion of other holdings) are set out in B42 and B43.
• IFRS 10 §B42In assessing whether its voting rights give it power, the investor considers all facts and circumstances, including the size of its holding relative to that of other vote holders and their dispersion (the more votes it holds, and the more parties that would need to act together to outvote it, the more likely it is to have power), potential voting rights, rights arising from other contractual arrangements and any additional facts, including voting patterns at previous shareholders' meetings. The Standard sets no percentage threshold.
• IFRS 10 §B46If it is not clear, having considered the factors in B42(a) to (d), that the investor has power, the investor does not control the investee.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Cèdre SA holds 40% of the voting rights of Lierre SA. The remaining 60% is spread among a very large number of holders, none holding more than 1%, and these holders have never voted together at previous meetings (case data). What can be concluded about Cèdre's power?L2
• Aube SA holds 35% of the voting rights of Brume SA. The balance belongs to about a hundred dispersed holders, the largest of which holds 4%. At the last three meetings, fewer than half of the voting rights were cast, and Aube had every resolution it put forward adopted (case data). Write a short note concluding on Aube's power, distinguishing case facts, rule and professional judgement.L3