ACCA Advanced Taxation (ATX) Practice Exam

What defines a 'change in ownership' of a company?

1. When 25% of the share capital changes ownership

2. When 50% of the share capital changes ownership

3. When 75% of the shares are sold

4. When any percentage of shares are sold

The correct answer is: When 50% of the share capital changes ownership

A 'change in ownership' of a company is typically defined by substantial changes in the control and decision-making power of the company. The correct answer reflects that a change occurs when 50% of the share capital changes ownership. This threshold is significant because owning 50% or more of the shares usually grants the shareholder the majority control of the company, thereby affecting who can make key decisions, influence company policy, and direct the operational strategy. This level of ownership is crucial for understanding control in corporate governance and strategic management. In contexts such as mergers and acquisitions, a transaction involving this level of share transfer often triggers regulatory requirements, disclosure obligations, and can impact the overall market perception of the company's stability and governance. Other options suggest lower thresholds which may not fully capture the control dynamic necessary to constitute a significant change in ownership. The percentage values less than 50% may lead to situations where control remains with the original ownership, thus not necessitating a formal redefinition of ownership.