CHAPTER 1 ASSOCIATED COMPANY Flashcards
Which of the following defines an associated company?
a) Companies with different ownership but shared management.
b) Two or more companies interconnected in specific ways, such as subsidiary relationships.
c) Companies with unrelated activities under separate management.
d) Two companies with the same CEO but no formal connections
Two or more companies interconnected in specific ways, such as subsidiary relationships.
What minimum voting power is required for a person to establish an associated relationship between two companies?
a) 10%
b) 15%
c) 20%
d) 25%
c) 20%
Investments by which of the following individuals are deemed to be the investments of the person?
a) Spouse
b) Minor children
c) Both (a) and (b)
d) Business partners
c) Both (a) and (b)
Which of the following relationships does NOT create an association under the Companies Act 2017?
a) A nominee director of a financial institution controlled by the Federal Government.
b) A person owning 30% voting power in two companies.
c) Two companies under common management and control.
d) An undertaking managed as a modaraba by one company
A nominee director of a financial institution controlled by the Federal Government
The directorship of which type of person does NOT create a relationship of associates?
a) A shareholder director
b) An independent director
c) A director with over 20% voting power
d) A director under common management
b) An independent director
Company A owns 50% voting shares in Company B. Both companies are managed by the same management team. What is the relationship between these two companies under Section 2(4)?
a) They are associated companies.
b) They are independent entities.
c) They are sister companies.
d) They are not associated due to differing legal statuses.
They are associated companies.
Person X is a director in Company A, which owns 25% voting power in Company B. Can Company A and Company B be classified as associated companies?
a) Yes, because the ownership exceeds the 20% threshold.
b) No, because the director’s role does not create an association.
c) Yes, because both companies are under common management.
d) No, because additional connections are required beyond ownership.
Answer: a) Yes, because the ownership exceeds the 20% threshold
A company owns shares in a financial institution controlled by the Federal Government. Does this create a relationship of association?
a) Yes, because the company owns shares in the financial institution.
b) No, because ownership of shares in government-controlled institutions does not create an association.
c) Yes, because the financial institution is indirectly connected to the government.
d) No, because the company is not directly managed by the government.
No, because ownership of shares in government-controlled institutions does not create an association.
Person Y holds 20% voting shares in Company A and 15% voting shares in Company B. Can these two companies be considered associated?
a) Yes, because the ownership in Company A exceeds the 20% threshold.
b) No, because the voting power in Company B does not meet the threshold.
c) Yes, because voting shares are combined for calculation purposes.
d) No, because the ownership does not overlap significantly.
b) No, because the voting power in Company B does not meet the threshold.
Two companies, X and Y, are under common management but have no voting power or ownership relationship. Can they be considered associated companies?
a) Yes, because they share common management.
b) No, because voting power or ownership is required for association.
c) Yes, because Section 2(4) considers common management as a valid criterion.
d) No, because the companies must also be financially interconnected.
Yes, because Section 2(4) considers common management as a valid criterion.
. Person Z’s spouse invests in Company A and holds 25% voting power. Person Z also invests in Company B with 15% voting power. Are Company A and Company B associated?
a) Yes, because spouse investments are deemed the person’s own investments.
b) No, because Person Z does not hold 20% or more in Company B.
c) Yes, because combined ownership exceeds 20%.
d) No, because there is no direct connection between the two companies
) Yes, because spouse investments are deemed the person’s own investments.
Shares owned by which of the following entities do NOT create a relationship of associates?
a) National Investment Trust (NIT)
b) Private financial institutions
c) A person owning 20% or more voting shares
d) A director managing a modaraba undertaking
a) National Investment Trust (NIT)
