The two investors, Adam and Eve, subscribe to invest in company Paradise Blue, a producing mine....

 

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The two investors, Adam and Eve, subscribe to invest in company Paradise Blue, a producing mine. Each party owns 50% of the issued share capital of Paradise Blue and appoint two members each to the board of directors. All mining operations are managed by the operator, investor Adam. The terms of the operating agreement state that the operator can only be replaced by the unanimous consent of the investors. The operating agreement also states that unanimous approval is required for: • Cessation of mining. • Any disposal of the mine. • The acquisition of any capital equipment above £50 million. The relevant activity for the arrangement is the rate at which mining activities are carried out, as the amount of ore extracted in a given period will affect the amount of profit or loss generated by company Paradise Blue. Required: Is there a joint arrangement? Explain in detail the reasons for your response. The two investors, Adam and Eve, subscribe to invest in company Paradise Blue, a producing mine. Each party owns 50% of the issued share capital of Paradise Blue and appoint two members each to the board of directors. All mining operations are managed by the operator, investor Adam. The terms of the operating agreement state that the operator can only be replaced by the unanimous consent of the investors. The operating agreement also states that unanimous approval is required for: • Cessation of mining. • Any disposal of the mine. • The acquisition of any capital equipment above £50 million. The relevant activity for the arrangement is the rate at which mining activities are carried out, as the amount of ore extracted in a given period will affect the amount of profit or loss generated by company Paradise Blue. Required: Is there a joint arrangement? Explain in detail the reasons for your response.

Answer rating: 100% (QA)

Yes there is a joint arrangement between Adam and Eve as they have joint control over Paradise Blue ... View the full answer