Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p59
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 152173–155139

the previous government's involvement in the operation of the rail network.  In this case, the government has substantive rights, irrespective of whether it chooses to exercise them.
IG14 Paragraph B24 states that to be substantive, rights need to be exercisable when decisions about the direction of the relevant activities need to be made.  Usually this means that the rights need to be currently exercisable.  However, paragraph B24 also notes that sometimes rights can be substantive even though they are not currently exercisable.  For many not-for-profit investors, power over an investee may be obtained from existing statutory arrangements.  Rights specified in substantively enacted legislation would be substantive rights that need to be considered by the investor in assessing control of an investee if it is assessed that the rights will be exercisable when decisions about the direction of the relevant activities need to be made.  However, the power to enact or change legislation does not give the investor the current ability to direct relevant activities of the investee.  Depending on circumstances, statutory arrangements may be in the nature of protective rights rather than substantive rights – see paragraphs IG15–IG17.

Protective rights
IG15 Protective rights are defined in Appendix A as rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights relate.  Applying this principle to not-for-profit entities, protective rights include rights held by a government or other entity in order to protect, as distinct from enhance, the interests of the government, the beneficiaries of an entity or the public at large.  In accordance with paragraph B27, such rights do not result in the investor (the government or other entity) having power over an investee or restricting another entity from having power over the investee.
IG16 Not-for-profit entities might hold regulatory powers that restrict the way in which regulated entities operate.  The regulatory powers may be exercisable through an established framework within which entities are required to operate, including the ability to impose conditions or sanctions on their operations.  Regulatory powers may represent protective rights, which do not give power (as defined in the Standard) over an investee, or substantive rights that need to be considered in determining control.  For example, regulatory powers may represent substantive rights when they would have the effect of giving the regulator the ability to direct the relevant activities of an investee in particular circumstances.  Not-for-profit investors are required by paragraph B26 to assess whether their rights (and rights held by others) are protective or substantive rights.
IG17 In addition to the examples in paragraph B28, examples of protective rights in relation to not-for-profit entities include:
(a) the right of a regulator to