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The presumption of significant influence is based on ownership of outstanding securities whose holders have current, not potential, voting privileges. An investor would generally disregard potential voting privileges that may become available in the future (e.g., call options or convertible instruments). Also, an investor must consider voting privileges attached to all classes of common stock, preferred stock, and debentures of the investee. For example, some convertible investments may allow investors to vote on an as-converted basis. Others may not permit exercise of voting rights until conversion to common stock. In the second example, those voting rights would not be considered in assessing the presumption of significant influence as they are not currently exercisable. See CG 3.3 for further information regarding consideration of potential voting privileges.
While significant influence is presumed to exist for investments of 20% or more of the investee’s outstanding voting common stock, this can be overcome if there is predominant contrary evidence. These factors are discussed in EM 2.3. Additionally, an investment of less than 20% of the voting common stock of an investee, in combination with other indicators (e.g., board representation), could also provide the investor with the ability to exercise significant influence. See EM 2.2 for further information.
An investor might be relatively passive and still have the ability to exercise significant influence over an investee’s operating and financial policies. That is, an investor does not need to actively exercise and demonstrate such ability. Therefore, it is not appropriate for an investor with an ownership interest of greater than 20% of the outstanding voting securities of an investee to overcome the significant influence presumption solely on the basis that it (1) has not historically exercised influence, and (2) does not intend to influence the investee in the future.

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