Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p61
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 157512–160294

beneficiaries may affect the extent to which the investor's social policy objectives are furthered.  These returns to the investor would reflect factors such as the efficiency and effectiveness of delivery of the goods and services and changes in the outcomes for the beneficiaries.

Link between power and returns
IG20 The third criterion set out in paragraph 7 for control of an investee is that the investor has the ability to use its power over the investee to affect the amount of the investor's returns.  As an example, the investor would have the ability to use its power over the investee when it can direct the investee to work with the investor to further the investor's objectives.  However, the existence of congruent objectives alone is insufficient for a not-for-profit investor to conclude that it controls an investee.

Delegated power
IG21 An investor with decision-making rights (a decision maker) is required by paragraph B58 to determine whether it is a principal or an agent.  Paragraphs B60 and B61 summarise factors to be taken into account in making that determination, such as the scope of the decision-making authority and the rights of other parties.  The following examples illustrate these paragraphs in relation to not-for-profit entities.
IG22 A charity establishes a trust to fund and construct village dams, bores and other water infrastructure in several provinces of a developing country.  The trustee is appointed by the charity to oversee the work of the trust.  The trustee receives remuneration from the trust commensurate with the services provided and the skills applied, plus a performance bonus upon the successful completion of individual projects.  The charity can replace the trustee at its discretion.  The trustee therefore is an agent of the charity and cannot control the trust in its own right.  In this case, the charity then needs to assess whether it controls the trust through the trustee.  For example:
(a) the trustee may have power over the trust in having the current ability to direct its relevant activities, whether through a broad decision-making authority or as determined by the charity in respect of major aspects, such as project selection.  Even if the trustee does not have exposure or rights to variable returns from the trust, the charity does so in terms of the extent to which its overseas aid objectives are achieved or furthered through the activities of the trust.  Since the trustee (as an agent of the charity) can use its powers to affect the trust's non-financial returns, the three control criteria are satisfied in respect of the charity and the charity would control the trust; or
(b) the trustee may be permitted by development regulations of the provincial governments to provide only oversight of