All about Related Party Transactions – Part 1 (Definition Part)

Framework

Companies Act – Sections 177 & 188

SEBI (LODR) – Regulation 23

Accounting – AS 18, Ind AS 24

What is a Related Party? (Answered as per Companies Act)

1. Individual Sense :-

• Director, Relative of Director
• KMP, Relative of KMP
• Director (and his/her relative) of Holding Company (Except Independent Director)
• KMP (and his/her relative) of Holding Company
• Firm in which Director/Manager (incl. relatives) are partners
• Pvt. Company in which Director/Manager (incl. relatives) are Directors/Members
• Public company in which Director/Manager are Directors AND holds >2% of voting power (along with relatives)

2. Corporate Sense :-

• Holding, Subsidiary & Associate
• Fellow Subsidiary
• Investor/ Venturer (Company)

Related party as per SEBI (LODR)

[Companies Act] + [AS/Ind AS] + [Any person/entity * belonging to the *promoter/promoter group of the listed entity and holding >20% of shareholding]

Related party as per AS 18

• Holding companies, Subsidiaries and Fellow subsidiaries
• Associate, JV, Investor & Venturer companies
• Individuals having Control (holding >50%)/Significant influence (holding >20%) and their relatives
• KMPs & their relatives
• Enterprises over which KMPs/major shareholders exercise significant influence

Related party as per Ind AS 24

• A person or a close family member having Control (holding >50%) / Significant influence (holding >20%) / KMP of (company or its holding) [Also includes an entity which is controlled/jointly controlled by the person]
• Companies of same Group (Holding, Subsidiaries, Fellow subsidiaries)
• Associate, JV, Investor & Venturer companies (any combination within the group except the Combination of “2 Associates”
• Employee trusts (post-employment benefit plan)
• An entity over which the Person [who is holding >50% of the Reporting entity) has Significant influence (holding >20%) / KMP of (company or its holding).