Charitable Trust Consolidation Query

[NumberCruncher99!]

Hi All, looking for some advice on how a charitable trust should be consolidated.

For background, there is a holding company (Company A), which was created for the sole purpose of holding 100% of the share capital in an SPV (Company B). Company A is held in a discretionary charitable trust by a management company. The management company also provide directorial services for a fixed fee, which is paid for by company B. In essence, there is no activity in Company A, other than the initial investment, which was funded by a gift by the parent of the consolidation group.

Company B passes the normal consolidation test, however Company A is difficult due to the trust status of the holding of shares in A.

The power over the investee is arguable held by the directors provided by the management company (there are no other directors), but they are directed per the trust to act in the best interest of the business and its purpose, and as such restricts the scope of their power.

There is no real exposure to variable returns, other than the value of the underlying investment in Company B, and the rights to those returns is ultimately held by an undetermined charity per the trust. The profit of Company B is limited, with returns exceeding this going back to the parent of the group via waterfall, and as such, any retained earnings upon cessation of the SPV are limited.

So based on the above, I am struggling to determine if Company A should be consolidated into the main group by combining many of IFRS 10's smaller caveats, or should the management company consolidate, or is there another answer? Please can you help advise on the key considerations taking into account the detail above, and I will be happy to provide any additional info required.

[JRSB]

Sounds like, in practice, the group can control the activities of the charity given they are the only trustee (or they provide all of the directors/trustees). If the intention was it was separately managed then why didn't they put in independent trustees etc...

[NumberCruncher99!]

Hi, the management company which holds the holding companies shares in trust and provides the directors, is independent to the group.

[JRSB]

In which case it sounds like it shouldn't be consolidated as there is no practical ability of the group to control the charity (I assume the management company doesn't appoint the group's Board as trustees...).

[Marek Muc]

it's not clear to me what's the role of the 'main group' in this arrangement...