A critical analysis of the new definition of the holding-subsidiary relationship

Abstract

This article reviews the new definition of the holding-subsidiary relationship, introduced by amendment in 1992 in South Africa into the Companies Act of 1973. It traces the efforts of the legislature, influenced by developments in the United Kingdom, to produce a single definition which would cater for both the control of abuse and the disclosure of economic interest. Particular difficulties with the new definition are explored, notably the requirement of membership, the implications of the shift in emphasis to control of voting rights, and a deeming provision in relation to unincorporated enterprises. Relevant accounting implications are also considered.

Keywords:

• holding company
• subsidiary
• control
• equity capital
• voting rights
• group financial statements
• disclosure

Additional information

Notes on contributors

G K Everingham

Geof Everingham is a Professor in the Dept, of Accounting, University of Cape Town

R D Jooste

Richard Jooste is Associate Professor of the Department of Commercial Law, University of Cape Town