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

Related-Party-Transactions-7651a3ce

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)
  1. 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).

CA Prabhath Sharma Ganti

Working as Audit Senior Assistant @Deloitte USI. Enthusiastic and Innovative writer. Writes about Taxation and Stock market aspects.

    One thought on “All about Related Party Transactions – Part 1 (Definition Part)

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    Social profiles