Applicability of Related Party Transactions under Companies Act, 2013 and SEBI (LODR) Regulations, 2015

CS Divyanshu Sahni

CS Divyanshu SahniSecurities and Exchange Board of India (SEBI) has notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) on 2nd September, 2015 after following the consultation process. SEBI in its Board meeting dated 19th November,2014  the conversion of existing listing agreements into a single comprehensive regulation for various type of listed entities. The Listing Regulations shall come into force on the 90th day from date of publication in the official gazette i.e. 1st December 2015.

This Table contains 17 Points of Applicability of Related Party Transaction under Companies Act, 2013 and SEBI (LODR) Regulation in the Tabular format. This is beneficial for my Younger Member who is Company Secretary of Listed Company and who is newly join a company. Related party is now a very complex issues now a days amongst the Company Secretaries.

Related Party Transactions under Companies Act 2013 and SEBI LODR

BasisCompanies Act, 2013SEBI LODR
Defination of Related PartyAs defined under Section 2 (76)As defined under Section 2 (76) and AS-18
Scope of

Transaction

Transactions covered under Section 188 (1)Transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged
Number of

approvals

Approval of Audit Committee, Prior approval of Board and ShareholdersPrior approval of Audit Committee and Shareholder‟s approval
Carve-out for ordinary course and arm’s length transactionsExcluded             from          the        purview of Section 188 (1)No such carve-outs
MaterialityAs provided under Rule 1510% of annual consolidated turnover
Exclusions       while computing materialityTransactions    in ordinary course and on arm’s length basisNo such exclusion
Need    for prior approval by shareholdersPrior approval required for material transactionsNo such requirement.
Voting  by related partiesRelated party    who      are parties to the transaction to abstain from votingAll related parties to abstain from voting
Applicability    to existing transactionsApplicable only to transactions entered into on or after April 1, 2014All existing material related party contracts or arrangements entered into prior to 2nd September and which may continue beyond such date.
Policy  on Material RPTsNo such requirementRegulation 23
Exemption       to government companiesFrom    the       shareholders ResolutionFrom the approval of Audit committee as well as shareholders
Review of transactions under omnibus approvalAudit    committee may decideQuarterly
Transactions which cannot be entered into under omnibus approvalAudit committee to decideNo such requirement.
Selling and disposing of undertakingCannot grant    omnibus approvalNo such restriction
Criteria for omnibus approvalPrescribed       in Rule 6A of MBP RulesNot prescribed
Validity of omnibus approvalOne financial yearOne year
Authority to set criteria for granting omnibus approvalAudit Committee subject to approval of BoardAudit Committee

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