Joint control and unanimous consent

Learning objectives

• Explain that joint control is the contractually agreed sharing of control, which requires the unanimous consent of the parties sharing control for decisions about the relevant activities.L1
• Determine, from the decision-making rules of an arrangement, whether decisions about the relevant activities require unanimous consent.L2

Normative references

• IFRS 11Appendix A definitions: a joint arrangement is an arrangement of which two or more parties have joint control; joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control; a joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement; a joint venture is a joint arrangement whereby those parties have rights to the net assets; the joint operator and the joint venturer are the parties that have joint control of the joint operation and of the joint venture respectively; a party to a joint arrangement is an entity that participates in it, regardless of whether it has joint control; a separate vehicle is a separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether they have a legal personality.
• IFRS 11 §7Joint control is the contractually agreed sharing of control of an arrangement; it exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

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

3 questions

• Joint control exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.L1
• Alpha SA and Bêta SA each hold 50% of the capital of Gamma SA. Under the agreement, decisions about Gamma's relevant activities are taken by simple majority of the board seats, and Alpha holds 5 of the 9 seats (case data). What is concluded about joint control of Gamma?L2
• Delta SA and Epsilon SA have entered into an agreement to operate a logistics platform together. The agreement provides that the annual budget, the choice of strategic customers and the appointment of the manager must be approved by both parties; other day-to-day decisions are delegated to the manager (case facts). Write a short justification stating whether the two parties have joint control, distinguishing rule, case facts and professional judgement.L2