Explain the following:

Question

a. Related and inter-related persons in terms of the 2008 Companies Act

Answer 1

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.