Related Party Transaction

    Posted By : Damini / Published on : 29-Jun-2020 05:59 PM / View : 32 / Comment : 0
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    A company invested into another Company owned by a related party. does the transaction of investing attract the provisions of section 188 of the Companies Act 2013 and the provisions of the related party under SEBI LODR regulations.

    1. Section 188 of the Act lists out certain transactions which will be considered as RPT under the Act. The list of RPTs are as follows:
    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, its subsidiary company or associate company; and

    g) underwriting the subscription of any securities or derivatives thereof, of the company:

    2. as per SEBI LODR “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.


    as per ICSI guidance note on RPT, a transaction of giving loan, making investment, providing guarantee or security is a transaction of a financial nature and is not covered under Section 188 of the Act. However, the requirement of Section 177 of the Act, which mandates the approval of the Audit Committee for all transactions with related parties (subject to the exception of transactions with wholly owned subsidiaries), would continue to apply.

    solicit views of the members on the same.
    Read more on : transaction party related



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