This PPT is on Related Party Transaction as per companies Act, 2013 and SEBI(LODR) 2015. you will company know who are related parties and what are approval required for related parties transactions. You can visit my you tube channel "CS Bhuwan Taragi- The Law Talks " for more clearity on this topic.

1. RELATED PARTY
TRANSACTION
Under Companies Act, 2013
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2. Why to regulate or disclose Related PartyTransaction?
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RPT may have a significant effect on the transactions or profit
and loss of the Company.
Transparency in such Related party transactions is essential.
Transactions with related parties need not always be disadvantageous to
the parties concerned.The concern arises only when the transactions which
are not at arm’s length prices beneficial to a related party but unfavorable
to the other stakeholders.

3. Provisions
defined for
RPT
Sec 188 of
Companies
Act, 2013
AS-18/ IND-
AS 24
Reg.23ofSEBI
(LODR)
Regulations,
2015
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4. Definition of ‘Related Party’ [Sec 2(76)]
Related
party
means,
with
reference
to a
Company
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is
a partner;
(iv) a private company in which a director or manager
or his relative is a member or director;
Continue…
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5. (v) 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 share capital;
(vi) any body corporate whose Board of Directors, MD or manager is accustomed to
act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is
accustomed to act:
But sub-clauses (vi) and (vii) shall not apply to the advice, directions or instructions
given in a professional capacity;
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6. (viii) any company
which is—
(A) a holding, subsidiary or an associate
company of such company; or
(B) a subsidiary of a holding company to which
it is also a subsidiary; (Common Holding co.)
(C) an investing company or the venturer of the
company;
Investing company or the venturer of a company” means a body corporate whose
investment in the company would result in the company becoming an associate company of
the body corporate.
(ix) such other person as may be prescribed;
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7. Definition of Relative as per sec. 2(77): -
with reference to
any person,
‘relative’ means
any one who is
related to
another, if—
• They are members of a Hindu
Undivided Family (HUF)
• They are husband and wife; or
• One person is related to the other in
such manner as may be prescribed;
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8. A person shall be deemed to be the relative of another
as per rule 4 of Companies (specification of definitions details) Rules, 2014
Father
(includes step
father)
Mother
(includes
step-mother)
Son (includes
step-son)
Son’s wife
Daughter
Daughter’s
husband
Brother/ sister
(includes
step-
brother/sister)
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9. Definition of Related Party under SEBI
LODR, 2015
Related Party
Reg. 2(1)(zb)
Related party defined
under Section 2(76) of the CA, 2013
Applicable accounting standards (AS 18 /IND-AS 24)
Any person or entity belonging to the promoter or promoter
group of the listed entity and holding 20% or more of
shareholding

10. Definition of Related Party as per AS-18
Related
Party
Parties are considered to be
related if at any time during the
reporting period one party has the
ability to control the other party or
exercise significant influence over
the other party in making financial
and/or operating decisions.
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11. Related Party as per IND-AS 24
A person or a close
member of that
person’s family is
related to a
reporting entity if that
person:
(i) has control or joint control of the
reporting entity; or
(ii) has significant influence over the
reporting entity; or
(iii) is a member of the KMP of the
reporting entity or of a parent of the
reporting entity.

12. Who all are excluded in the definition of
Related Party?
Director or KMP of Associate and JV companies
Public companies where directors hold less than 2% share capital
Any person appointed in senior management of
• The company or
• Associate company or
• Subsidiary company or
• Holding Company
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13. Arm’s length transaction
a transaction
between
two related
parties
so that there is
no conflict
of interest
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Arm’s Len g th
Transaction
that is conducted as
if they were
unrelated

14. means any office or place—
(i) 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;
(ii) where such office or place is held by
 an individual other than a director or
 by any firm, private company or
 other body corporate
(who is related party)
Explanation: “office or place of profit”
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if holding it receives from the company
anything by way of remuneration, salary,
fee, commission, perquisites, any rent-
free accommodation, or otherwise;

15. What is Related PartyTransaction?
The Companies Act, 2013 does not define the expression “Related PartyTransactions”.
Section 188 refers the expression contract or arrangement to ‘related party transactions.’
As per AS-18 Related PartyTransactions are defined as “a transfer of resources or
obligations between related parties, regardless of whether or not price is charged.”
As per IND AS -24 “A related party transaction is a transfer of resources, services or
obligations between a reporting entity and a related party, regardless of whether a price is
charged.”
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16. Related PartyTransection as per Sec. 188(1)
No company shall enter into any contract or arrangement with a related party Except
with the consent of the Board of Directors given by a resolution at BM and subject to
such conditions as may be prescribed, with respect to—
(a)
sale, purchase
or supply of
any goods or
materials;
(b)
selling or
otherwise
disposing of,
or buying,
property of
any kind;
(c)
leasing of
property of
any kind;
(d)
availing or
rendering of
any services;
(e)
appointment
of any agent
for purchase or
sale of goods,
materials,
services or
property;
(f)
such related
party's
appointment to
any office or
place of profit in
-the company,
- Subsidiary co.
or
-Associate co.
(g)
underwriting
the
subscription of
any securities
or derivatives
thereof, of the
company:
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17. 1. Contract or arrangement shall be entered with the prior approval of the company by a
resolution (Ordinary Resolution)
 in the case of a company having a paid-up share capital of not less than such amount, or
transactions exceeding such sums [threshold limit under Rule 15(3)], as may be prescribed:
Interested Shareholder/Member
2. if such member is a related party, that member shall not vote on such resolution, to approve
any contract or arrangement which may be entered into by the company
3. But Related Parties can vote on such resolution in a company in which 90 % or more
members, in number, are relatives of promoters or are related parties:
Exceptions
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Rule 15(2): Interested Director
Where any director is interested in any contract or arrangement with a related party:
 such director shall not be present at the meeting during discussions on the subject matter of the
resolution relating to such contract or arrangement.

18. 5. The requirement of passing the Resolution by members under first proviso to
sec 188(1) shall not be applicable if:
transactions entered into between a holding company and its WOS
whose accounts are consolidated with such holding company and placed
before the shareholders at the GM for approval.
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4. Section 188(1) shall not apply to any transactions entered into by the
company
 Ordinary course of business.
 transactions which are on an arm’s length basis:

19. CS BhuwanTaragi -The LawTalks
Rule 15(3) of the companies(Meetings of board and its power), Rules 2014 : Prior Approval of Shareholders required:
Prior approval of shareholders of the company is required if transaction of contracts or
arrangements exceeds the with criteria as mention below- (ordinary Resolution)
SNO TRANSACTION WHEN RESOLUTION REQUIRED
1. sale, purchase or supply of any goods or material,
directly or through appointment of agent
Amounting to 10 % or more of turnover or
Rs. 100 cr.
2. selling or otherwise disposing of or buying property of
any kind, directly or through appointment of agent
Amounting to 10 % or more of net worth or
Rs. 100 cr.
3. Leasing of property of any kind Amounting to 10 % or more of net worth or
10 % or more of turnover or
Rs. 100 cr.
4. availing or rendering of any services, directly or
through appointment of agent
Amounting to 10 % or more of turnover or
Rs. 50 cr. ,
5. Appointment to any office or place of profit in the
company, subsidiary company or associate company
Remuneration exceeding Rs. 2.5 Lakhs per month
6. Underwriting the subscription of any securities or
derivatives of the company
Remuneration exceeding 1 % of net worth
whichever is
lower
whichever is
lower
whichever is
lower
whichever is
lower

20. Approval of RPTs in Audit committee (AC)
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Section 177 (4) (iv): Every Audit Committee shall act as specified by board which shall include approval or any
subsequent modification of RPTs.
 Audit Committee may make omnibus approval for RPTs proposed to be entered into by the company
subject to such conditions as may be prescribed;
 In case of transaction, other than transactions referred to in section 188, and where Audit Committee
does not approve the transaction, it shall make its recommendations to the Board
 In case any transaction involving any amount not exceeding 1 crore rupees is entered into by a director or
officer of the company without obtaining the approval of the Audit Committee and it is not ratified by the
Audit Committee within 3 months from the date of the transaction, such transaction shall be voidable at
the option of the Audit Committee and
 if the RPT is with the related party to any director or is authorized by any other director, the director
concerned shall indemnify the company against any loss incurred by it:
 The provisions of this clause shall not apply to a transaction, other than a transaction referred to in section
188, between a holding company and its WOS company.
Exceptions:

21. Approval Process for RPTs
Board approval
• Approval under sec.
188(1) for all RPT
which are within the
threshold limits
Members approval
• All the Material
RPTs under Reg. 23
• RPTs exceeding the
threshold limits
under Rule 15(3)
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Audit Committee
approval
• Prior approval for all
RPTs
• May make Omnibus
approval for certain
RPT

22. Section 188(3): Ratification within three Months
Where any contract or arrangement is not pre-approved by Board of directors or shareholders:-
 Same shall be ratified by board or by shareholders as case may be within 3 months from the date on which
such contract or arrangement was entered into.
 if it is not ratified, such contract or arrangement shall be voidable at the option of the Board or of the
shareholders, as the case may be and
 if the contract or arrangement is with a related party to any director, or is authorised by any other director,
such directors concerned shall indemnify the company against any loss incurred by it.
Section 188(2): Disclosure of RPT in the Board Report:
Every contract or arrangement entered into under section 188(1) shall be referred to in the Board’s
report to the shareholders along with the justification for entering into such contract or
arrangement.
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23. Contravention of Non-compliance under
Companies Act, 2013
Any director or any other employee of a company, who had entered into or authorised the contract
or arrangement in violation of the provisions of this section shall liable to —
(i) in case of listed company penalty of 25 lakh rupees
(ii) in case of any other company penalty of 5 lakh rupees
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Section 188(4): Recovery of any Loss from Director or any other Employee
It shall be open to the company to proceed against a director or any other employee who had
entered into such contract or arrangement in contravention of the provisions of this section for
recovery of any loss sustained by it as a result of such contract or arrangement.

24. Definition of Related PartyTransaction
under LODR
Under Reg 2(1)(zc) “related party transaction” 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:
Provided that this definition shall not be applicable for the units issued by mutual funds
which are listed on a recognized stock exchange(s);
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25. Reg. 23: Related PartyTransaction under LODR
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(1) The listed entity shall formulate a policy on materiality of RPTs and on dealing with RPTs
including clear threshold limits duly approved by the board of directors and such policy shall
be reviewed by the board of directors at least once every 3 years and updated accordingly
(2) All related party transactions shall require prior approval of the audit committee.
(3) Audit committee may grant omnibus approval for RPTs proposed to be entered into by
the listed entity
(4) All material RPTs shall require approval of the shareholders through resolution and no
related party shall vote to approve such resolutions
(5)The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases:
(a) RPT entered into between two govt. companies;
(b) RPT entered into between a holding company and itsWOS whose accounts are consolidated
with such holding company and placed before the shareholders at the general meeting for approval.

26. Disclosure of RPT as per SEBI(LODR),2015
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Regulation 53: requires Listed Entities to disclose RPT Disclosures in their annual
reports as specified in para A of ScheduleV.
Regulation 34(3) requires Listed Entities to make disclosures in their annual reports
which are specified in schedule V, These are requirements are addition to the
disclosure to be made in the Board’s Report under section 134 of CA2013
Regulation 23(9) states that Listed Entities should submit within 30 days from the
date of publication of its standalone and consolidated financial results for the half
year, Disclosure of RPT on consolidated basis in prescribed format and also publish
the same on website.

27. Two conditions have to be satisfied to avail of the exemptions from the
provisions of Related party u/s 188 by a Company.
1. It must be entered into by the Company in the ordinary course of its
business;
2. It must be an Arm’s length transaction.
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What are the conditions to avail the exemption form
provisions of section 188?

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