Question Tag: Contractual Rights

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 5 Marks

CR – Mar 2023 – L3 – Q4b – Business combinations and consolidation Series

Explanation of protective rights under IFRS 10 and examples of situations where voting or contractual rights may be considered protective.

Whether an investor’s rights in an entity are voting or contractual under IFRS 10: Consolidated Financial Statements, these rights should be carefully evaluated to find out whether they are mere protective or actually confer power over the investee.

Required:
Explain protective rights, providing FOUR (4) instances where voting or contractual rights could be regarded as protective. (5 marks)

 

Protective rights are designed to safeguard the interests of the party holding those rights without granting that party power over the entity to which those rights relate. Such rights relate to fundamental changes to the activities of an investee or apply in exceptional circumstances. However, not all rights that apply in exceptional circumstances or are contingent on events are protective. Since protective rights are meant to protect the interests of their holder, an investor holding only protective rights cannot have control over an investee nor prevent another party from having control.

(1 mark)

Examples of protective rights:

  1. Lender’s rights: Rights held by a lender that can be used to prevent the borrower from undertaking activities that could significantly change the credit risk of the borrower.
  2. Rights to seize assets: Rights held by a lender to seize assets in the event of default.
  3. Approval of major capital expenditure: The right of a non-controlling interest holder in an investee to approve capital expenditure above a set limit or to approve the issuance of equity or debt instruments.
  4. Government’s golden share: Blocking rights held by a government or founding party over matters like foreign takeovers or changes to an investee’s founding charter via a “golden share.”
  5. Franchise brand protection: Rights held by a franchisor to protect the franchise brand against adverse actions by a franchisee.

(Any 4 points @ 1 mark each = 4 marks)

(Total: 5 marks)

  • 10 Marks

BCL – May 2021 – L1 – Q2a – Contract Law

Analysis of a contractual transaction based on an advertisement and determining entitlement to the offer.

Kakai Company Limited had for weeks advertised their products in the electronic and print media that “Buy GH¢450 worth of products from any of our branches and get one blender free”. The deadline for the promotion was 30 November 2020. Fiifi saw the advertisement and bought products worth GH¢600 from one of the branches on 1 October 2020. Fiifi demanded the free blender. However, the sales girl told him there was no free blender to be given in that branch. An argument then ensued.

Required:
i) Describe in TWO (2) ways the nature of the transaction. (4 marks)

ii) Determine whether Fiifi should be entitled to the blender. (6 marks)

i) Elements of a contract to be mentioned – Offer, Acceptance, Consideration, Intent to create legal relation:

  • An offer may be made to a particular individual, groups or classes of persons or the world at large.
  • In an offer made to the world at large, the offer ripens into a contract with anybody who comes forward and the condition required.
  • Such an offer made ends in a contract with the limited portion of the public who come forward and perform the condition on the faith of the advertisement.
    (Any two points @ 2 marks each = 4 marks)

ii) Therefore, the transaction was an offer to the world at large, and the limited portion of the public that came forward was Fiifi, who acted on the condition. Fiifi is, therefore, entitled to the blender. (6 marks)

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope