Question

PT X is negotiating with PT Y to acquire 100% share capital of PT Z. PT Z is currently owned fully by PT Y and meets the business definition as defined in PSAK 22. Sales shares must obtain approval from the shareholders of PT X and the government. Because of approval it takes time, before when the share sale is completed, PT X and PT Y make
agreement that:
• Both parties are committed to completing legally subject to consent required;
• Determine the purchase price;
• Determined that the following decisions and actions can be taken by PT Y only with
PT X approval until the sale of shares, through:
o Changes in the management of PT Z;
o Dividend payment; and,
o New project contracts that exceed IDR 200 billion.
Does PT X control PT Z as a result of this agreement?

Answer 1

As per the agreement between PT X and PT Y, PT Y should get approval from PT X to make any changes in the management of PT Z, Dividend distribution and signing of new project contracts. These decisions are major one and it is part of the general level management and administration. PT Y cant make any decisions with out the prior consent of PT X on these matters and these are very crucial too. So that as per the agreement, we can say that, PT X will control PT Z as a result of this agreement