Pillow Entity (PE) acquired 45% of the voting rights of Sofa Entity (SE). The remaining voting rights are held by thousands of shareholders, none individually holding more than 1% of the voting rights. There are no agreements among other shareholders to make collective decisions. PE is able to direct the relevant activities of SE and to use its power to affect its returns from SE. What type of relationship does PE have with SE?
A) Majority voting rights
B) Influence over the investee
C) Control of an entity
D) The location of the parent and subsidiary entity

Question

Quizplus · Accepted Answer

PE has control of SE because it has the ability to direct the relevant activities of SE and to affect its returns, indicating a control relationship despite not having a majority of the voting rights.

Pillow Entity (PE) Acquired 45% of the Voting Rights of Sofa