What is De Facto Control?

A question asked in May 2015  for reference :
A Ltd holds ownership of 10% of voting power and control over the composition of Board of Directors of B Ltd. While planning the statutory audit of A Ltd   what factors would be considered by you for audit of financial statements 
Question : 1. Is this a De Facto Control ?
2. Please explain how to understand and interpret a de Facto Control in brief.

1 answer

Ravi Staff April 15, 2019

Control of a corporation generally exists by reason of holding more than 50% of voting power. This is called – de jure control.
The concept of control also includes what is often referred to as de facto control. An example of de facto control might be a situation where a person holds 50% or less than 50% of the voting power of a corporation but hold enough “other influence” (loan, technology etc agreements) so that they could force the corporation to act in accordance with his or her wishes.


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