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A giving or providing finance or property to related

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(a) giving or providing finance or property to related party o (b) buying an asset from or selling an asset to the related party o (c) leasing an asset from or to the related party o (d) supplying services to or receiving services form the related party o (e) issuing securities or granting an option to the related party o (f) taking up or releasing an obligation of the related party C. Related Party The second question is whether the recipient of the financial benefit was a related party Under {s 228 Corporations Act} it defines the scope of what ‘related parties’ to public companies are A related party can be: o Controlling entities { s 228(1) Corporations Act} o Directors and their spouses {s 228(2) Corporations Act} This includes directors of an entity that controls the public company {s 228(2) (b) Corporations Act}
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Each of the persons of the controlled entity {s 228(2)(c) Corporations Act} All the above people’s spouses {s 228(2)(d) Corporations Act} o Relatives of directors and spouses {s 228(3) Corporations Act} Parents and children of the directors and spouses { s 228(3)(a) and (b) Corporations Act} o Entities controlled by other related parties {s 228(4) Corporations Act} o Related party in previous 6 months {s 228(5) Corporations Act} So if it hasn’t been related for within 6 months then this is a possible exception! o Entity has reasonable grounds to believe that it will become a related party in future {s 228(6) Corporations Act} o Acting in concert with related party {s 228(7) Corporations Act} Recall that an ‘entity’ includes all unincorporated bodies and bodies corporate and individuals {s 9 Corporations Act} It should be noted that this provision only applies to public companies o And their controlled entities under {s 50AA Corporations Act} rather than Holding Company-Subsidiary test o This is a flexible test whereby the first entity has capacity to determine the outcome of decisions about the second entity’s financial and operating polices then they are in control D. Exempt Transactions The third question that must be asked is if the transaction falls within one of the exemptions under {Division 2 of Chapter 2E Corporations Act} Under these exemptions, shareholder approval would not be required for a public company or an entity that controls it to give a financial benefit to a related party D.1 Arm’s Length Terms Under {s 210 Corporations Act} member approval is not needed to give a financial benefit on the terms that: o (a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm’s length o (b) are less favourable to the related party than the terms referred to in par (a) In deciding whether the transaction was on commercial terms, the Court would ask whether the transaction was reasonable in all circumstances and would have particular regard to market value of the benefit conferred on the related party {ASIC v Adler} D.2 Other Exemptions
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