Question

Mr. Newton owns 80% of the shares of Ace Ltd. His wife, Mrs. Newton, owns 90% of the shares of Cennential Inc. Mr. and Mrs. Newton each own 45% of the shares of Bellevue Company. Are any of the three companies associated? If yes, is there any way any of the companies can opt-out of being associated?

Answer 1

Associate companies :-

In a broadest sense the accociate company is a corporation in which a parent company or any person possess a ownership stake. Usually the parent company or personal owns only a minority (20% to 50%) stake of the associate company as opposed to subsidiary company in which a majority stake (51% to 100%) is owned.  

The actual definition where is greatly from jurisdiction to jurisdiction and in different fields as the concept of associate company is used in the fields of economics, accounting, finance, taxation, securities and beyond.

two companies will become associate companies when the both of of the companies having a common stakeholder or common controlling authority for two or more members can exercise authority on the company.

In the given case, Mr. Newton and Mrs. Newton are relative parties to each other.

Pattern of holdings of both of them are :-

Holdings	Mr. Newton	Mrs. Newton
Ace ltd	80%
Cennential Inc		90%
Bellevue company	45%	45%

As per above analysis of holding patterns all the three companies or associate companies to each other.

If any company wants to opt out from the name of associate company then Mr. Newton or Mrs. Newton has to reduce their percentage of holding to less than 20% in that particular company. Then only any company has chance to get out of the name of associate company.

These are all the information required to solve the above given question.

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