Related-Party

Related Party under Companies Act 2013

Related Party under Companies Act 2013

A company is an artificial judicial person having a separate legal entity. Hence, any transaction of a company with a related party must be identified, approved and disclosed, as per accounting standards in India. In this article, we look at the definition of a related party, as per the Companies Act, 2013.

A related party, with reference to a company means:

  • Director or his/her relative;
  • Key managerial personnel or his/her relative;
  • A firm, in which a Director, Manager or his/her relative is a Partner;
  • Private limited company in which a Director or Manager or his/her relative is a member or Director;
  • Public limited company in which a Director or Manager is a Director and holds along with his/her relatives, more than 2% of its paid-up share capital;
  • Body 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;
  • Person on whose advice, directions or instructions a Director or Manager is accustomed to act. (This section does not apply to persons acting in their professional capacity)
  • Any company which is a holding, subsidiary or an associate company of such company;
  • Any company which is a subsidiary of a holding company to which it is also a subsidiary;

Related Party to Director of Company

As per the definition of related party, a Director of a company or his/her relative is also a related party to the company. The following persons are defined as a relative to the Director as per Companies Act, 2013, if:

  • they are members of a Hindu Undivided Family;
  • if they are husband and wife;
  • if the person is related as Father, including step-father;
  • if the person is related as Mother, including step-mother;
  • if the person is related as Son, including step-son;
  • if the person is related as Daughter, including step-daughter;
  • if the person is related as Son’s wife;
  • if the person is related as Daughter’s husband;
  • If the person is related as Brother, including step-brother(s);
  • If the person is related as Sister, including step-sister(s);

Post by IndiaFilings

IndiaFilings.com is committed to helping entrepreneurs and small business owners start, manage and grow their business with peace of mind at an affordable price. Our aim is to educate the entrepreneur on the legal and regulatory requirements and be a partner throughout the entire business life cycle, offering support to the company at every stage to make sure they are compliant and continually growing.