Affiliated Person

What Is an Affiliated Person?

An affiliated person is someone in a position to influence the actions of a corporation. This includes directors, officers, and certain shareholders. Contingent upon the specific situation, an affiliated person may be alluded to simply as an "affiliate." Affiliated persons may also be called control persons or insiders.

Understanding Affiliated Persons

Regarding a securities registration, the Securities and Exchange Commission (SEC) expands the definition of an affiliated person extensively. Form S-11 defines an affiliated person to also include:

1. Persons claiming 10% or a greater amount of any class of a company's stock
2. Any person who is a promoter of the company and associated with the company in any way
3. Any principal underwriter of the securities being registered
4. Any person giving management or advisory services to the company
5. "Any associate of any of the prior persons"

Distinguishing affiliated persons from others is important in the regulation of securities transactions. Affiliated persons frequently approach inside information and thus their transactions are all the more carefully regulated.

In the event that an entity's business or larger amount of property is operating under an operating agreement or lease of a debtor, they are also considered an affiliate.

Special Considerations

In bankruptcy proceedings, affiliated persons are anybody who owns or controls any part of a company. A debtor is an individual or company filing for bankruptcy, so their affiliated persons would be those who own the debtor corporation...or those who own the owner of the debtor.

Affiliated persons who own 20% of the company or more or have voting power equivalent to that percentage are considered affiliates. All in all, an affiliate is a company or individual that owns 20% of a company. In any case, in reference to owners, who hold securities as a fiduciary, debt controller, or agency, such rules for affiliates don't have any significant bearing.

With regards to a loan agreement, affiliated persons are individuals or entities, who control or own a large portion of the entity applying for a new line of credit or offering a loan. Once more, these affiliated persons can employ control over the organization, either straightforwardly or in a roundabout way. Be that as it may, these rules don't matter to subsidiaries of an entity.

Likewise, in the event that an organization operates under an operating agreement or lease of a debtor, that organization is considered an affiliated person.

By law, affiliate persons are restricted from participating in certain actions, such as selling any security or other property to such registered company, or to any company controlled by such registered company — unless such sale just involves the accompanying:

• Securities issued by the purchaser
• Securities issued by the seller and which are part of a general offering to the holders of a class of its securities
• Securities deposited with the trustee of a unit investment trust or periodic payment plan

Highlights

• Affiliated persons can incorporate directors, officers, and certain shareholders.
• Affiliated persons frequently approach inside information; consequently, their transactions are all the more carefully regulated.
• An affiliated person is someone in a position to influence the actions of a corporation.