AUE1601_summary-Exam Prep

Topic 2: Interpretation, purpose, application and formation of a company Study unit 2.1 Related and interrelated persons, and control (Sec 2) and Subsidiary relationships (Sec 3)  Consanguinity: blood relationship o First degree: children (incl. adopted) and parents o Second degree: brother, sister, grandparents, grandchildren – there is at least one generation between you and a person related to you in the second degree  Affinity: due to valid marriage o First degree: husband and wife or living together similar to marriage o Second degree: same as the underlying degree of relationship by blood  An individual related to juristic person: o Individual directly/indirectly controls juristic person  A juristic person related to another juristic person: o Either of them directly or indirectly controls the other or the business or the other, or o Either is a subsidiary of the other, or o A person directly or indirectly controls each of them or the business of each of them From revision slides: Relationship between individual and juristic person (company) • Individual holds majority of shares in company (51% or more) • Individual together with related/inter related person holds majority of shares (e.g. John, his wife, and his brother together holds 51% or more) • Individual’s wife or brother or child or parents holds 51% or more (even though the individual may hold nothing) • Individual, although holding 0% or less than 50% of the shares, has the right to appoint or choose directors who controls the board. From revision slides: Relationship between juristic person and juristic person (company and company) • Company A holds 51% or more of the shares in Company B • Company A is able to appoint or choose the directors that controls the board of Company B • John and/or his wife together holds 51% or more of the shares in both Company A and Company B • Company A holds 51% in Company B and Company B holds 100% in Company C (all three are related and part of the same group).  A person controls a juristic person or its business if: o If the juristic person is a company:  The juristic person is a subsidiary of the first person (refer to first section under subsidiary relationships), or  The first person together with a related or interrelated person is  Able to directly or indirectly exercise or control the majority of voting rights of securities of the company, whether pursuant to a shareholder agreement or otherwise, or  Has the right to (or control of right) appoint or elect directors of the company who control the majority of the votes at a board meeting o If the juristic person is a close corporation:  The first person owns the majority of the members interest, or controls directly or has the right to control the majority of the members votes P a g e | 2 o If the juristic person is a trust:  The first person is able to control the majority of the votes of the trustees or to appoint the majority of the trustees, or to appoint the majority of the beneficiaries of the trust o If the first person has the ability to materially influence the policy of the juristic person in a way similar to a person, in ordinary practice, would be able to exercise control referred to in the above 3 bullet points  A court, Companies Tribunal or the Panel may exempt a person from application of a provision of the Act that would apply to someone because of a relationship (as stated in previous page), if the person can show that there is sufficient evidence proving that they acted independently of the related or inter-related person Subsidiary relationships:  A company is a subsidiary of another juristic person if one or more subsidiaries of the juristic person, or one or more nominees of the j