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Summary AUE1601 NOTES
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Summary of 63 pages for the course Legal Aspects in Accountancy at University of South Africa (AUE1601 NOTES)
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AUE1601Summarised NOtes
Revision Pack
Exam NOtes
,AUE1601
Summarised NOtes
Revision Pack
Exam NOtes
,Topic 2: Interpretation, purpose, application and formation
of a company
Section 2 & 3:
Related and interrelated persons, and control:
An individual is related to another individual if:
• In terms of the Act, a person is related to another if such a person is related to the other
person, within the second degree of consanguinity or affinity.
• Consanguinity: “blood relationship”
• Affinity: Relationship exists due to a valid marriage
• In other words - Married or living together as if married
- Brothers/Sisters
- Parents
- Grandparents
- Children (includes adopted children)
- Grandchildren
, An individual is related to a juristic person if:
• The individual directly/indirectly controls the juristic person:
• Individual holds majority of shares in company (51% or more)
• Individual together with related person holds majority of shares (e.g. John, his wife and his
brother 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.
• In case of the juristic person being a close corporation, that person must own the majority of
members’ interest, or controls directly, or has the right to control, the majority of members’
votes in the CC.
• In case of the juristic person being a trust, that person has the ability to control the majority
of the votes of the trustees or to appoint the majority of the trustees, or to appoint to
change the majority of beneficiaries of the trust
A juristic person (company) is a subsidiary (related) of a juristic person (company) if:
• Company A holds 51% or more of the shares in Company B
• John and/or his wife holds 51% or more of the shares in both Company A and Company B
• Company A is able to appoint or choose directors who controls the board of 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 company is a wholly-owned subsidiary of another juristic person if all of the shares are
held, alone or in combination, by the subsidiary(alone)/ subsidiaries(group).
Section 4:
Solvency and Liquidity:
Solvency test:
• Assets fairly valued =/> Liabilities fairly valued
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