Related Party under Companies Act 2013.
Si. No | Related parties | Examples |
1. | A director or his relative ( Relative means a member of the same HUF, husband, wife, father, step father, mother, step mother, son, step son, son’s wife, daughter, daughter’s husband, brother, step brother, sister, step sister) |
Mr L, Mr M and Mr N are directors and the relatives of these Directors are considered as related parties. |
2 | Key managerial personnel or his relative |
Say, Mr O is a Company secretary,his relatives will be considered related parties. |
3 | A firm in which a director, manager, or relative is a partner |
Mr L is a partner at RST. Pvt. Ltd, another firm. This firm will also be considered as a related party. |
4 | A private company in which a director, manager, or relative is a member or director |
Mr. M is a director in M Pvt Ltd – In this case M Pvt. ltd becomes a related party.Even when Mr. M’s relative is a member or director in M Pvt ltd, this company will be considered as a related party. |
5 | A public company in which a director or manager is a director and holds along with his relatives more than 2% of its paid-up capital |
Mr. N along with his relatives holds more than 2% of the paid-up capital of N ltd. In this case, N Ltd will be considered as a related party. |
6 | Any body corporate whose board of directors, MD or manager is required to act in accordance with the advice, directions or instructions of a director or manager (NA in cases when these directions are followed in professional capacity) |
When P Ltd acts on the directions of Mr. L, P Ltd will be a related party. |
7 | Any person on whose advice, directions or instructions a director or manager is required to act (NA when this is done in professional capacity) |
Mr A holding 51% in LMN Ltd on whose advice Mr L has to act will be considered as a related party. |
8 | Holding, Subsidiary or Associate of such company |
These all will be considered as related parties:
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9 | Any company which is subsidiary of a holding company to which it is also a subsidiary |
PQR & LMN are both subsidiaries of ABC ltd. Thus, PQR also becomes a related party |
Related Party Transactions under Companies Act 2013.
Si No | Transactions as per Companies Act requiring approval of the Board by resolution | Transactions as per The Companies (Meetings of Board and its powers) Rules 2014 requiring approval by the company by resolution |
1 | Goods and Material: Sale, purchase or supply |
Sale/Purchase/Supply of goods/material directly or through an agent covering 10% or more of turnover OR one hundred Crores (whichever is lower). |
2 | Property: Selling or buying or leasing |
Sale/Purchase of property directly or through an agent that is 10% or more of net worth OR one hundred Crores (whichever is lower). In case of leasing of property directly covering 10% or more of turnover OR one hundred Crores (whichever is lower). |
3 | Agent for (1) and (2) above |
Availing or rendering of services directly or through an agent which is 10% or more of turnover OR fifty Crores (whichever is lower) |
(All the above limits are to be taken on all transactions done on a financial year basis) | ||
4 | Others:
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