Associates

There are four parts to determining who are the associates of an entity. They deal with:

1. of an individual
2. of a company
3. of a trustee
4. of a partnership.

Part 1 - Associates of an individual

The associates of an individual - other than an individual acting in the capacity of a trustee - are:

• Relatives of the individual - that is, the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of the individual or of his or her spouse; and the spouse of the individual or of any other person mentioned above
• A partner of the individual or a partnership of which the individual is a partner
• The spouse, including de facto spouse, or child of a partner, where the partner is also an individual - other than an individual acting in the capacity of a trustee
• The trustee of a trust, where the individual or another entity that is an associate by virtue of this part benefits under the trust
• A company where that company is sufficiently influenced by    
  • the individual
  • another entity that is an associate of the individual because of the rules in this part or
  • another company which is sufficiently influenced by the individual or
  • two or more of the above entities, or
   
• A company where the capacity to cast or control greater than 50% of the maximum votes at a general meeting of the company is held by    
  • the individual
  • associates of the individual under the rules in this part
  • the individual and the associates.
   

Part 2 - Associates of a company

Part 2 deals with the associates of a company - called company A. The associates of company A include:

• A partner of company A.
• A partnership of which company A is a partner.
• Where a partner of company A is an individual otherwise than in the capacity of a trustee, the spouse or child of the partner.
• The trustee of a trust where company A, or an entity that is an associate of company A, benefits under the trust.
• An entity (entity B) that exerts sufficient influence over company A or holds a majority voting interest in company A. The influence may be exerted by entity B alone or together with other entities. The majority interest may be held by entity B alone or together with entities that would be associates of entity B if it were treated as company A.
• A company (company C) that is sufficiently influenced by company A or in which company A holds a majority voting interest. The influence may be exerted by company A alone or together with other entities that are sufficiently influenced by company A or in which company A holds majority voting interests. The majority voting interests may be held by company A alone or together with entities that are associates of company A.
• Any other entity (entity D) that would be an associate of a third entity (entity E) which would be an associate of company A if the associates of entity E were determined by treating it as company A.

Majority voting interest

An entity holds a majority voting interest in a company if the following shareholdings amount to 50% or more of the maximum number of votes that can be cast at a general meeting of the company:

• the entity's direct shareholding in the company, and
• the entity's indirect shareholding in the company - for example, through a subsidiary.

An example is where a company has a wholly owned subsidiary that has a 75% voting interest in another company. Both the parent and subsidiary would be associates of the third company because the subsidiary has a majority voting interest in the third company and the parent has a majority voting interest in the subsidiary.

Sufficient influence

An entity is sufficiently influenced by a second entity or other entities if the entity is accustomed, under an obligation or might reasonably be expected to act in accordance with directions, instructions or wishes of the second entity or other entities.

Part 3 - Associates of a trustee

The associates of a trustee are:

• any entity that benefits under the trust
• any entity that is an associate of an individual who benefits under the trust or
• where a company is an associate of the trustee under either of the two above dot points, an entity that is an associate of the company.

Rules relating to public unit trusts

In applying the tests for associates, the trustee of a public unit trust is treated as if it were a company. Special rules apply to determine whether a public unit trust is sufficiently influenced by another entity or whether an entity has a majority voting interest in the public unit trust.

Generally, a public unit trust will be sufficiently influenced by another entity or entities where the trust is accustomed to act or is under an obligation to act or might reasonably be expected to act in accordance with the directions, instructions or wishes of the entity or entities.

The concept of a majority voting interest in relation to a public unit trust is determined by reference to the capital or income of the trust. If an entity is entitled to, or is entitled to acquire, 50% or more of the income or capital of the trust, the entity is considered to hold a majority voting interest in the public unit trust. Corresponding rules apply to test whether a group of entities have a majority voting interest in the trust.

Part 4 - Associates of a partnership

The associates of a partnership are:

• a partner in the partnership
• where the partner is an individual, any entity that would be an associate of the individual or
• where the partner is a company, any entity that would be an associate of the company.