Indirect interest
74F Indirect interest
A relevant entity has an indirect interest in a corporation if the corporation is linked to another corporation (the directly controlled corporation) in which the entity has a direct interest.
Note—
It is possible for a relevant entity to have more than 1 indirect interest in a corporation. In that case, the relevant entity has an aggregate interest in the corporation under section 74G(1)(b).Examples—
1 The relevant entity has a direct interest in corporations A and B. Both corporations A and B have a direct interest in corporation C.
2 The relevant entity has a direct interest in corporation A. Corporation A is linked to another corporation through more than 1 chain of corporations.
A corporation is linked to the directly controlled corporation if the corporation is part of a chain of corporations—
that starts with the directly controlled corporation; and
in which a link is formed if a corporation has a direct interest in the next corporation in the chain.
Examples—
1 A relevant entity has a direct interest in corporation A (the directly controlled corporation). Corporation A has a direct interest in corporation B. Corporations A and B are linked and form part of a chain of corporations. Therefore, the relevant entity has a direct interest in corporation A, and an indirect interest in corporation B.
2 Corporation B also has a direct interest in corporation C. Corporations B and C are linked to corporation A, and corporations A, B and C form part of a chain of corporations. The relevant entity has a direct interest in corporation A, and an indirect interest in corporations B and C.
3 Corporation B also has a direct interest in corporation D. There are now 2 chains of corporations, 1 consisting of corporations A, B and C and the other consisting of corporations A, B and D. Corporations B, C and D are all linked to corporation A. The relevant entity has a direct interest in corporation A, and an indirect interest in corporations B, C and D. However, if a relevant entity had a direct interest in corporation C only, the entity would not have an indirect interest in corporation D because corporation D is not linked to corporation C.
The value of a relevant entity’s indirect interest in a corporation (the indirectly controlled corporation) that is linked to a directly controlled corporation is the percentage worked out by multiplying the following amounts—
the value of the relevant entity’s direct interest in the directly controlled corporation;
the value of each direct interest that forms a link in the chain of corporations by which the indirectly controlled corporation is linked to the directly controlled corporation.
Examples—
1 A relevant entity has a direct interest (with a value of 80%) in corporation A. Corporation A has a direct interest (with a value of 70%) in corporation B. The value of the relevant entity’s indirect interest in corporation B is 80% x 70% = 56%. For section 72, the relevant entity has a controlling interest in corporation B.
2 Corporation B also has a direct interest (with a value of 40%) in corporation C. The value of the relevant entity’s indirect interest in corporation C is 80% x 70% x 40% = 22.4%. For section 72, the relevant entity does not have a controlling interest in corporation C.
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