Related Party under Companies Act 2013.

Si. NoRelated 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:

  • ABC Ltd holding 51% in LMN Ltd (Holding Company)
  • LMN Ltd holding 51% in XYZ Ltd (Subsidiary Company)
  • DEF Ltd holding 30% in LMN Ltd (Associate Company)
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 NoTransactions as per Companies Act requiring approval of the Board by resolutionTransactions 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)
4Others:

  • Availing of or rendering of services
  • Underwriting of securities or derivatives
  • Related partys’ appointment to place of profit or office* in the company/subsidiary/associate
  • If the Director or individual other than director/firm/private company/body corporate receive from the company an amount over and above the remuneration (In case of directors) and anything by way of remuneration for others will need the approval of the Board by a resolution.
  • Related party’s appointment to place of profit or office* in the company/subsidiary/associate where the remuneration exceeds two and a half lakhs
  • Underwriting of securities or derivatives when remuneration exceeds 1% of the net worth