ACCA Advanced Taxation (ATX) Practice Exam

What constitutes a consortium in terms of company ownership?

1. Individuals owning shares in one company

2. Two or more companies each owning at least 5% and collectively owning 75%

3. One company owning multiple subsidiaries

4. Companies that collaborate on specific projects

The correct answer is: Two or more companies each owning at least 5% and collectively owning 75%

A consortium typically refers to a collaboration between two or more entities that share resources or capabilities, often for a specific purpose or project. In the context of company ownership, option B accurately defines a consortium as comprising two or more companies that each own at least 5% and together hold a collective ownership of at least 75%. This arrangement ensures that the participating companies have a significant stake and influence over the consortium, which can lead to collaborative decision-making and resource sharing. This structure allows companies to combine their strengths, diversify risks, and engage in larger ventures more efficiently than they might individually. The percentage thresholds mentioned also imply a necessary level of commitment and ownership that is indicative of a consortium rather than a loose association or informal partnership. The other options do not appropriately characterize a consortium. For instance, individuals owning shares in one company pertains to individual investment rather than a collaborative ownership structure. One company owning multiple subsidiaries describes a corporate hierarchy and does not involve collaboration among different companies. Lastly, collaboration on specific projects does not inherently imply ownership or the formal structure associated with a consortium, as it could involve joint ventures or temporary partnerships without the specified ownership percentages.