77Indirect interest

#### 77 Indirect interest 77 Indirect interest > > (1) An 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. > > > (2) A corporation is linked to a directly controlled corporation if the corporation is part of a chain of corporations— > > > > > (a) that starts with the directly controlled corporation, and > > > > > (b) in which a link in the chain is formed if a corporation has a direct interest in the next corporation in the chain. > > > (3) The following are examples of how subsections (1) and (2) work (the examples are cumulative)— > > > > > (a) corporation A (a directly controlled corporation) has a direct interest in corporation B. Corporations A and B form part of a chain of corporations, and corporation B is linked to corporation A. Accordingly, an entity that has a direct interest in corporation A also has an indirect interest in corporation B, > > > > > (b) corporation B also has a direct interest in corporation C. In this case, corporations A, B and C form part of a chain of corporations. Both corporations B and C are linked to corporation A. The entity that has a direct interest in corporation A has an indirect interest in both corporations B and C, > > > > > (c) corporation B also has a direct interest in corporation D. There are now 2 chains of corporations, one consisting of A, B and C, and one consisting of A, B and D. Corporations B, C and D are all linked to corporation A and an entity that has a direct interest in corporation A would have an indirect interest in corporations B, C and D. An entity that has a direct interest in corporation B would have an indirect interest in corporations C and D. However, an entity that has a direct interest in corporation C only would not have an indirect interest in corporation D, as corporation D is not linked to corporation C. > > > (4) The value of the indirect interest of an entity in a corporation (an indirectly controlled corporation) that is linked to a directly controlled corporation is calculated by multiplying together the following— > > > > > (a) the value of the direct interest of the entity in the directly controlled corporation, > > > > > (b) 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. > > > (5) The following are examples of how subsection (4) works (the examples are cumulative)— > > > > > (a) an 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 indirect interest of the entity in corporation B is 80% × 70% (that is, 56%). Accordingly, in this example the entity has a controlling interest (within the meaning of section 73 (Groups arising from tracing of interests in corporations)) in corporation B, > > > > > (b) corporation B also has a direct interest (with a value of 40%) in corporation C. The value of the indirect interest of the entity in corporation C is 80% × 70% × 40% (that is, 22.4%). Accordingly, in this example the entity does not have a controlling interest in corporation C. > > > (6) It is possible for an entity to have more than one indirect interest in a corporation. This may occur if the corporation is linked to more than one corporation in which the entity has a direct interest, or if the corporation is linked to only one corporation in which the entity has a direct interest but is linked through more than one chain of corporations. In that case, the entity has an aggregate interest in the corporation (see section 78 (Aggregation of interests)).