(140)-PARENT UNDERTAKING

Parent Undertaking

Financial Reporting Standards (FRS) states that an undertaking is the parent undertaking of another undertaking if any of the following apply.

• It holds a majority of the voting rights in the undertaking.
• It is a member of the undertaking and has the right or appoints or removes directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters.
• It has the right to exercise a dominate influence over the undertaking:
  1. By virtue of provisions contained in the undertaking’s memorandum or articles.
  2. By virtual of a control contract (in writing, authorized by the memorandum or articles of the controlled undertaking, permitted by law).
• It is a member of the undertaking and controls alone, under an agreement with other shareholders or members, a majority of the voting rights in the undertaking.
• It has a participating interest in the undertaking and one of two things applies.
  1. It actually exercises a dominant influence over the undertaking.
  2. It and the undertaking are managed on a unified basis.
• A parent undertaking is also treated as the parent undertaking of the subsidiary undertakings of its subsidiary undertakings.

This replaced the provisions criterion of owing a majority of equity with one of holding a majority of voting rights. Also, the board is controlled to be controlled if the holding company has the right to appoint directors with a majority of the voting rights on the board (not just to appoint a simple majority of the directors, regardless of their voting rights).