RELATED PARTY

TRANSACTIONS ( RPTS)

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Index

Provisions of Companies Act, 2013 and Rules made there under

relevant to RPTs
General Prohibition of RPTs
Nature of RPTs
Definition of Related Parties
Relations included in the definition of relatives
Key Managerial Personnel means
Related Parties Transactions Exceptions
Approvals required for RPTs
Participation / voting by the Director / Member in the meeting
Particulars to be disclosed in the agenda of Board Meeting
Particulars to be disclosed in the Explanatory Statement of Notice
of Company's Meeting
Reporting requirements
Consequences of not complying the provisions of Companies Act,
2013
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Provisions of Companies Act, 2013 and

Rules made thereunder relevant to RPTs

Section 2(51),2(76),2(77), 188 of

Companies Act , 2013

Rule 3 and 4 of Companies

(Specification of definitions details)
Rules, 2014

Rule 15 of Companies (Meetings of

Board and its Powers) Rules, 2014
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General Prohibition of

RPTs

The Companies Act, 2013 prohibits

some transactions with the related
parties without the approval of the
Board / Company to avoid the
conflict of interest of the company
with that of related parties .

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Nature of Related Party

Transactions
The following comes under RPT

sale, purchase or supply of any goods or materials;

selling or otherwise disposing of, or buying, property of
any kind;
leasing of property of any kind;
availing or rendering of any services;
appointment of any agent for purchase or sale of
goods, materials, services or property;
appointment to any office or place of profit in the
company, its subsidiary company or associate company;
and
underwriting the subscription of any securities or
derivatives thereof, of the company
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Definition of Related PartiesNatural persons by virtue of their

position in the company.continued

Director of the company or its

holding company or his relative;
Key managerial personnel of the
company or its holding company or
his relative;

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Definition of Related Parties-

Association of persons because of

influence of natural persons who are in position in the company . continued

Firm in which a director, manager or his

relative is a partner;
Private company in which a director or
manager is a member or director;
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;
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Definition of Related Parties- Association of persons

because of position of the company..continued

Holding, subsidiary or an associate

company of such company; or

Subsidiary of a holding company to

which it is also a subsidiary;

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Definition of Related Parties-

Persons / Association of persons who influence or be

influenced by the natural person in position in the company.

Any person

Any body corporate

on whose advice ( except

professional capacity) , directions or instructions
a director or manager is accustomed to act:
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;
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Relations included in the

definition of relatives

Hindu Undivided Family;

Husband and wife; or
Father and mother which includes step-father and
Members of a

step-mother .

Son which includes step-son and sons wife.

Daughter and Daughters husband .
Brother and sister which includes step-brother and
step-sister.
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Key Managerial Personnel means

Chief Executive Officer or the

managing director or the manager;
the company secretary;
the whole-time director;
the Chief Financial Officer;

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Related Parties Transactions Exceptions

All business transactions done in the

ordinary course of business done
on arms length basis means
transactions done as if there is no
relations between parties .

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Approvals required for RPTs

Board approval in the meeting

Companys approval by special resolution in case paid-up share
capital is Rs 10 crores or
Sale etc of goods or materials directly or through agent
exceeding 25% of the turnover of the company
Selling etc of property / services directly or through agent
exceeding 10% of the net worth of the company
Leasing of property directly or through agent exceeding 10% of
the net worth or turnover of the company
Appointment to any office or place of profit exceeding Rs 2.50
lacs per month
Underwriting commission exceeding 1% of net worth of the
company .
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Participation / voting by the

Director / Member in the meeting

Director who is related party shall

not participate in the meeting
Member who is related party shall
not vote on the resolution

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Particulars to be disclosed in
the agenda of Board Meeting
Name of the related party and nature of relationship;
Nature, duration of and particulars of the contract or arrangement;
Material terms and value of the contract or arrangement, if any;
Advance paid or received for the contract or arrangement, if any;
Manner of determining the pricing and other commercial terms,

both included as part of contract and not considered as part of the

contract;

Whether all factors relevant to the contract have been considered, if

not, the details of factors not considered with the rationale for not
considering those factors; and

Other information relevant or important for the Board to take a

decision on the proposed transaction.

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Particulars to be disclosed in the

Explanatory Statement of Notice
of Company's Meeting

Name of the related party;

Name of the director or key managerial
personnel who is related, if any;
Nature of relationship;
Nature, material terms, monetary value and
particulars of the contract or arrangement;
Other information relevant or important for
the members to take a decision on the
proposed resolution.
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Reporting Requirements

Disclose the particulars of

RPTs in the Boards report

Consequences of not
complying the provisions of
Companies Act, 2013

Contract voidable at the option of the Board in case it is

not rectified by Board or Company within three months.

Director/employee concerned be personally liable to

indemnify the company any loss incurred

Director/employee in case of listed company shall be

punishable with imprisonment which may extend to one
year or fine from twenty five thousands to five lacs

Director/employee in case of other company shall be

punishable only with fine of rupees twenty five
thousands to five lacs

Thanks for studying the PPT in

patience

Please feel free to contact me on the

following number for any clarification,
discussion on this topic or any other topic
on the Companies Act, 2013.

Mobile No. 9872999989

Thanks again.