XYZ IncOwns 55% of DEF's 100,000 Outstanding Voting Shares

question 9

Multiple Choice

XYZ Inc.owns 55% of DEF's 100,000 outstanding voting shares.Another company,GHI Inc,owns 40%,with the remaining shares being held by many individual investors.GHI Inc.also owns $25,000,000 worth of DEF Inc's $1,000 par value bonds,each of which is convertible to one voting share of DEF Inc.Which of the following statements regarding the control of DEF Inc.is correct?

• A)XYZ Inc has control over DEF Inc as it owns a majority of the latter's currently outstanding voting shares.
• B)XYZ Inc does not have control over DEF Inc,as it cannot exercise control over DEF's strategic operating,investing and Financing activities without the cooperation of GHI Inc.
• C)GHI Inc has de facto control over DEF Inc.
• D)As long as GHI does not exercise its option to convert its bonds to voting shares,XYZ Inc.has control over DEF Inc.

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