Section 2: Related and Interrelated Persons, and Control
Topic 2
• Consanguinity – Blood Relationship
• Affinity – Due to Marriage
A person is related to another if such a person is related to the other person within the second degree o
consanguinity or affinity
A individual is related to a juristic person if the individual directly or indirectly controls the juristic person
A juristic person is related to another juristic person:
• Either directly or indirectly controls the other
(a person controls a juristic person:
if the juristic person is a subsidiary of that first person
if the first person together with any related or interrelated person is directly/indirectly able to
exercise/control the majority voting rights associated with securities of the company OR has th
to appoint or elect directors of the company)
• Either is a subsidiary of the other
• Person directly or indirectly controls each of them or the business of each of them
,Brother/Sister (2nd Degree) Grandparents (2nd Degree)
Parents (1st Degree)
You
Children (1st Degree)
Grandchildren (2nd Degree)
Examples of relations:
• Don and Sandra have been married for several years. Even though Don works in Johannesburg Mo
to Friday and lives in a separate apartment during these days Don and Sandra are still related.
• Lynette owned 100% of the shares in Master Locks(Pty) Ltd and recently transferred all her share to
adopted son. Lynette and the company is still related as she is related to her son even though he is
adopted.
• Blue Hills (Pty) Ltd appointed Mr Patrice Lumumba and Mr Eugene Wollongong as the directors of
Wollongong (Pty) Ltd. They control the majority of the votes at board meetings. Both companies ar
related as Blue Hills (Pty) Ltd has indirect control over Wollongong (Pty) Ltd
• Sonny and Cher are not married, but because they have been living together for several years with
children similar to marriage they are related
, Section 3: Subsidiary Relationships
A company is a subsidiary of another juristic person if that juristic person is directly or indirectly able to
exercise a majority of the general voting rights associated with issued securities of that company OR
Has the right to appoint or elect, or control the appointment or election of directors of that company wh
control a majority of the votes at a meeting of the board
Determining whether a person controls all or a majority of the general voting rights:
• Voting rights that are exercisable only in certain circumstances are to be taken into account only whe
those circumstances have risen and only when those circumstances are under the control of the pers
holding the voting rights
, Section 4: Solvency and Liquidity Test
Liquidity Test:
Solvency Test:
• Current Assets must equal or exceed
• Assets, fairly valued must be current liabilities
equal or exceed the liabilities of • Company must be able to pay its debts
the company to pass the as they become due in the ordinary
solvency test course of business for a period of 12
months after the date of the test
These tests are used for the following:
Any director will b
• Share capital reduction
held liable if
• Share capitalization
approving any
• Financial assistance for purchase of own shares
situation while no
• Financial assistance to directors or related persons
satisfying the
• Issue of dividends
solvency and liquid
• Other compensations
test
Topic 2
• Consanguinity – Blood Relationship
• Affinity – Due to Marriage
A person is related to another if such a person is related to the other person within the second degree o
consanguinity or affinity
A individual is related to a juristic person if the individual directly or indirectly controls the juristic person
A juristic person is related to another juristic person:
• Either directly or indirectly controls the other
(a person controls a juristic person:
if the juristic person is a subsidiary of that first person
if the first person together with any related or interrelated person is directly/indirectly able to
exercise/control the majority voting rights associated with securities of the company OR has th
to appoint or elect directors of the company)
• Either is a subsidiary of the other
• Person directly or indirectly controls each of them or the business of each of them
,Brother/Sister (2nd Degree) Grandparents (2nd Degree)
Parents (1st Degree)
You
Children (1st Degree)
Grandchildren (2nd Degree)
Examples of relations:
• Don and Sandra have been married for several years. Even though Don works in Johannesburg Mo
to Friday and lives in a separate apartment during these days Don and Sandra are still related.
• Lynette owned 100% of the shares in Master Locks(Pty) Ltd and recently transferred all her share to
adopted son. Lynette and the company is still related as she is related to her son even though he is
adopted.
• Blue Hills (Pty) Ltd appointed Mr Patrice Lumumba and Mr Eugene Wollongong as the directors of
Wollongong (Pty) Ltd. They control the majority of the votes at board meetings. Both companies ar
related as Blue Hills (Pty) Ltd has indirect control over Wollongong (Pty) Ltd
• Sonny and Cher are not married, but because they have been living together for several years with
children similar to marriage they are related
, Section 3: Subsidiary Relationships
A company is a subsidiary of another juristic person if that juristic person is directly or indirectly able to
exercise a majority of the general voting rights associated with issued securities of that company OR
Has the right to appoint or elect, or control the appointment or election of directors of that company wh
control a majority of the votes at a meeting of the board
Determining whether a person controls all or a majority of the general voting rights:
• Voting rights that are exercisable only in certain circumstances are to be taken into account only whe
those circumstances have risen and only when those circumstances are under the control of the pers
holding the voting rights
, Section 4: Solvency and Liquidity Test
Liquidity Test:
Solvency Test:
• Current Assets must equal or exceed
• Assets, fairly valued must be current liabilities
equal or exceed the liabilities of • Company must be able to pay its debts
the company to pass the as they become due in the ordinary
solvency test course of business for a period of 12
months after the date of the test
These tests are used for the following:
Any director will b
• Share capital reduction
held liable if
• Share capitalization
approving any
• Financial assistance for purchase of own shares
situation while no
• Financial assistance to directors or related persons
satisfying the
• Issue of dividends
solvency and liquid
• Other compensations
test
