Explain the following:
a. Related and inter-related persons in terms of the 2008 Companies Act
Related and inter-related persons in terms of the 2008 Companies Act refer to individuals or entities that are connected or associated with each other based on certain criteria specified in the Act. The Act provides guidelines and regulations for determining related and inter-related persons in the context of company operations and transactions.
Some examples of related and inter-related persons as defined by the 2008 Companies Act include:
1. Directors and their relatives: The Act considers directors of a company and their immediate family members (spouse, children, parents, siblings) as related persons. This is to ensure transparency and prevent conflicts of interest in decision-making processes.
2. Subsidiaries and holding companies: The Act considers a company and its subsidiary or holding company as related persons. This relationship exists when one company controls or has a significant influence over the other, either through ownership of shares or through management control.
3. Associates and joint ventures: Companies that have significant influence over or participate in the management of another company, but do not have control over it, are considered associates or joint ventures. These entities are considered inter-related persons under the Act.
4. Transactions between related parties: The Act imposes certain restrictions and disclosure requirements for transactions between related parties. For example, if a director of a company is involved in a transaction with the company, the Act requires that the transaction be conducted at arm's length and be disclosed to shareholders.
5. Shareholders and their associates: The Act also considers shareholders and their associates as inter-related persons. This includes individuals or entities that have a significant influence on the shareholder's decision-making or whose decision-making is influenced by the shareholder.
The identification and regulation of related and inter-related persons under the 2008 Companies Act aim to ensure corporate governance, prevent conflicts of interest, and promote transparency in company operations and transactions.
Under the 2008 Companies Act, related and inter-related persons refer to individuals or entities that are connected to a company in some way. These connections can influence decision-making within the company or impact its operations.
a. Related Persons:
Related persons are individuals or entities linked to a company based on their relationship with key stakeholders. The 2008 Companies Act identifies the following related persons:
1. Directors: Related persons include the directors of a company, which refers to individuals appointed to the board of directors to manage and supervise the company's affairs.
2. Subsidiary Companies: Related persons can also include subsidiary companies controlled by the company. A subsidiary company is a company that is controlled by another company, known as the parent company.
3. Holding Companies: If the company itself is a subsidiary of another company, the parent company is considered a related person. A holding company, also known as a parent company, has control over one or more subsidiary companies.
4. Holding-Subsidiary Relationship: Related persons can also exist through a holding-subsidiary relationship, where both the holding and subsidiary companies have control or significant influence over each other.
It is important to note that these related persons can exert influence or have a conflict of interest in the decision-making process of the company.
b. Inter-related Persons:
Inter-related persons are individuals or entities having a business relationship with the company beyond mere relatedness. The 2008 Companies Act identifies the following inter-related persons:
1. Associates: This includes persons who are associated or connected to the company through a partnership, joint venture, or other business arrangements.
2. Promoters: Inter-related persons can also include promoters who are involved in the incorporation or formation of the company.
3. Connected Persons: Those connected to the company by virtue of being its employee, director, trustee, or officer.
4. Related Transactions: Inter-related persons can engage in related transactions with the company. These transactions can include the acquisition or disposal of assets, provision of services, loans, or guarantees.
The 2008 Companies Act may impose specific regulations regarding the disclosure of related and inter-related persons to ensure transparency and prevent conflicts of interest within a company.