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Related Party Transactions under Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) (LODR) regulations, 2015.

S. No. Particulars Companies Act, 2013

SEBI( LODR) Regulations, 2015

(Shall cover only Materiality of Related Party Transaction)

1 Definition

Related Party Transactions-

Not Defined under Companies Act

Related Party Transactions-

Pursuant to regulation 23 of LODR related party transactions means

“a transfer of resources, services or obligations between a listed entity and a related party, regardless of whether a price is charged and a "transaction" with a related party shall be construed to include a single transaction or a group of transactions in a contract”

Related Party-

Pursuant to Section 2(76) with reference to a company, means-

  1. A director or his relative;
  2. a Key Managerial Personnel or His relative
  3. A firm, in which a director, manager or his relative is a partner.
  4. A private company in which a director or manager is a member or director;
  5. A public company in which a director or manager is a director or holds along with his relatives, more than two per cent of its paid-up share capital.
  6. Anybody corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
  7. Any person on whose advice, directions or instructions a director or manager is accustomed to act:

    Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;

  8. any company which is-
    1. A holding, subsidiary or an associate company of such company; or
    2. A subsidiary of a holding company to which it is also a subsidiary;
  9. Such other person as may be prescribed;

Related Party-

(Not Defined. But, referred to the Companies Act meaning for Related Party)

Means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable accounting standards:

Provided that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognized stock exchange(s);

2 Disclosures. Shall be disclosed in Board’s report pursuant to Section 134 of Companies Act, 2013 No such disclosures are required pursuant to LODR regulation
3 Material Related Party transactions There is no concept of material related party transactions as per Companies Act, 2013

Pursuant to regulation 23 a transaction with a related party shall be considered material if:

“the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.

4 Voting Pursuant to Section 188 of the Companies Act, 2013 and relevant MCA Circular states that no members of the Company shall vote on resolution, to approve any contract or arrangement which may be entered into by the Company, in case such member is a related party with reference to such contract/arrangement for which members’ approval is being sought.

Pursuant to regulation 23 of LODR

All material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party to the particular transaction or not.

5 Review of Related Party Transaction No provision specified in the act. Audit committee shall review, at least on quarterly basis, based on omnibus approval given by the audit committee.
6 Approval for Related Party Transactions

Approval of audit committee, if any is required for all Related Party Transactions

Approval of board & prior approval of share holders by way of special resolution is required where the transaction value exceeds the threshold limits specified in Section 188.

All material related party transactions shall require prior approval of audit committee and also approval of shareholders by passing a resolution in general meeting.

Audit committee shall give omnibus approval for related party transaction of listed entity.

The omnibus approval shall specify:

  1. The name(s) of the related party, nature of transaction, period of transaction, maximum amount of transactions that shall be entered into
  2. The indicative base price / current contracted price and the formula for variation in the price if any; and
  3. Such other conditions as the audit committee may deem fit:
    1. Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding Rs. 1 crore per transaction

7 Office or place of profit.

Meaning is covered under the act-

The expression “office or place of profit” means any office or place-

  1. where such office or place is held by a director, if the director holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
  2. where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
There are no provisions relating to office or place of profit pursuant to LODR regulations.

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  • By Revanth Gopidi  0 Comments   

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