Exercise 20.4 ★ ★ SUBSIDIARY STATUS Pumpkin Ltd owns 40% of the shares of Soup Ltd, and holds the only substantial block of shares in that entity; no other party owns more than 3% of the shares. The annual general meeting of Soup Ltd is to be held in 1 month’s time. Two situations that may arise are: • Pumpkin Ltd will be able to elect a majority of Soup Ltd’s board of directors as a result of exercising its votes as the largest holder of shares. As only 75% of shareholders voted in the previous year’s annual meeting, Pumpkin Ltd may have the majority of the votes that are cast at the meeting. • By obtaining the proxies of other shareholders and, after meeting with other shareholders who normally attend general meetings of Soup Ltd and convincing these shareholders to vote with it, Pumpkin Ltd may obtain the necessary votes to have its nominees elected as directors of the board of Soup Ltd, regardless of the attendance at the general meeting. Required Discuss the potential for Soup Ltd being classifi ed as a subsidiary of Pumpkin Ltd.