25D. Persons connected with director in section 25C

Question 1

25D. Persons connected with director in section 25C

• Generally, they are:
  (a) a member of the director’s family;

(b) a body corporate connected with a director because the director (and persons connected with him) are interested in at least 20% of the share capital of that body corporate; or entitled to exercise or control, directly or indirectly of more than 20% of the voting power at a general meeting of that body corporate;
(c) a trustee of a trust of which the beneficiaries thereof include the director and persons connected to him under s 25D(1)(a) and (b), or where the trust confers a power to be exercised for the benefit of that director;
(d) a partner of the director, or a partner of persons connected with the director under s 25D(1)(a), (b) and (c);
(e) a firm that is a legal entity of which the director is a partner, or of which a partner of the firm is a person connected with the director under s 25D(1)(a), (b) and (c), or of which a partner of the firm is a firm itself and in which the director is a partner or persons connected with the director under s 25D(1)(a), (b) and (c) is/are partner(s).

Answer 1

General overview
[25D.01] The new s 25D provides a list of definitions on who are “persons connected with a director” for the purposes of s 25C. Generally, they are: (a) a member of the director’s family; (b) a body corporate connected with a director because the director (and persons connected with him) are interested in at least 20% of the share capital of that body corporate; or entitled to exercise or control, directly or indirectly of more than 20% of the voting power at a general meeting of that body corporate; (c) a trustee of a trust of which the beneficiaries thereof include the director and persons connected to him under s 25D(1)(a) and (b), or where the trust confers a power to be exercised for the benefit of that director; (d) a partner of the director, or a partner of persons connected with the director under s 25D(1)(a), (b) and (c); (e) a firm that is a legal entity of which the director is a partner, or of which a partner of the firm is a person connected with the director under s 25D(1)(a), (b) and (c), or of which a partner of the firm is a firm itself and in which the director is a partner or persons connected with the director under s 25D(1)(a), (b) and (c) is/are partner(s). Section 25D(1)(f) excludes a director of a company from being a “person connected with a director of a company”.

Question 2

Clarifications

Answer 2

[25D.02] Subsection (2) provides some clarifications as follows: (i) subsection (2)(c) states that the voting power referred to in paragraph (b)(ii) includes the voting power whose exercise is controlled by a body corporate controlled by him; (ii) subsection (2)(d) states that if a body corporate which is connected to a director by virtue of subsection (2)(b)(i) and (ii) is a beneficiary of a trust, that body corporate is NOT treated as connected with the director.

Question 3

Subsection (2)(c)

Answer 3

[25D.03] Subsection (2)(c) provides that where a director controls more than 20% of the voting power of a company under subsection (2)(b)(ii), it shall include a director who controlled a body corporate who in turn controls, directly or indirectly, more than 20% of the voting power of the company. Note: a director would control a body corporate if he owns more than 50% of the total number of its shares.