Assignment task: Alien Ltd is a strategic investor that uses its investment company to invest in various projects and firms. Required: Critical analysis and state whether the following activities make Alien Ltd to include in the consolidation.
1. Alien Ltd invested 25% in voting rights in a mining company. Two other investors have made similar investments with Alien Ltd in other companies, and they have a similar strategic mindset and have voted together. Each of these two investors holds 20% voting rights. Over 1,000 people hold voting rights, but they are small-parcel shareholders.
2. Alien Ltd invested in a joint venture with another business partner. Alien Ltd takes a passive role, and another business partner is actively engaged in the operations.
3. Alien Ltd has a substantial loan receivable from Highest Holdings, which is a going concern. Currently, Alien Ltd holds 30% of voting shares, and another major shareholder holds 45%. Due to financial stress, Highest Holdings has agreed to convert the loans payable into shares if it becomes eminently likely to go into administration.
4. Alien Ltd has a trustee company trading as Alien Trust. It is a discretionary trust whose beneficiaries are the owners of Alien Lid and Rangoon Ltd. Over the past years, Alien Ltd held 40% and Rangoon Ltd 60% of the distributed income. Under the trust deed, Alien Ltd has control over the trust's operating and financing decisions.
5. Alien Ltd has invested in a trading company overseas where it has 55% of voting rights. Due to changes in government policy, the government will likely either buy out shares to become the major shareholder or have statutory power to appoint majority directors. The legislation is being drafted. Then, it must go to the parliament and senate for approval.
6. Alien Ltd holds a 70% interest in Beta Ltd, which was converted into voting shares through a loan. Beta Ltd has had continuous operating losses in the past two years. However, Alien Ltd does not hold a majority of the board seats.