Related Party Transactions & Recent Amendments in LODR, 2015

S. NO.

(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;

(v) a public company in which a director or manager is a director and holds along with his relatives, more than two per cent of its paid-up share capital;

(vi) any 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;

(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;

(viii) a directors, other than an Independent Director or key managerial personnel of the Holding Company or his relative.

(A) a holding, subsidiary or an associate company of such company;

(B) a subsidiary of a holding company to which it is also a subsidiary; or

(C) an investing company or the venturer of the company;”;

Explanation.—For the purpose of this clause, “the 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.]

(ii)     Related Parties as defined under Applicable Accounting Standards  – IND AS 24.

*Definition of Related Party- has been widened to include the following: 

(a)   Any person or entity forming a part of the promoter group of the Company; or 

(b)   Any person or any entity, holding 20% or more equity shares of the Company and w.e.f. 1st April 2023, 10% or more equity shares of the Company, at any time, during the immediate preceding Financial Year. 

*Inserted by SEBI (LODR)(Sixth Amendment) Regulations, 2021, w.e.f 01.04.22

(1). they are members of a Hindu Undivided Family

(2). they are husband and wife

(3).  Father : Provided that the term “Father” includes step-father

(4).  Mother : Provided that the term “Mother” includes step-mother

(5). Son : Provided that the term “Son” includes step-son

(6). Son’s wife

(7).  Daughter

(8). Daughter’s husband

(9). Brother : Provided that the term “Brother” includes step-brother

(10). Sister : Provided that the term “Sister” includes step-sister

as per Companies Act, 2013

(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.

Not applicable in case of Private and Unlisted Public Companies

(a) the Company and its related parties;

(b) the Company and Related Parties of subsidiaries;

(c) Transactions between Subsidiaries and Related Parties of the Company;

(d) Transactions between Subsidiaries and Related Parties of subsidiaries; and

(e) W.e.f. 1st April 2023, it shall also include the Company or its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the Company or its subsidiaries. 

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: 

Exemption from purview of RPT- 

(a) Issue of Equity Shares/ other securities convertible into equity shares, on preferential basis. 

(b) Following Corporate actions which are uniformly applicable/ offered to all Shareholders: 

(i) Payment of Dividend

(ii) Sub-division /consolidation of securities

(iii)  Issuance of securities by way of Rights/Bonus Issue,

(iv) Buy-back of securities. 

(c)  Acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms uniformly applicable/offered to all shareholders /public, subject to disclosure of the same along with the disclosure of related party transactions every six months to the stock exchange(s), in the format as specified by SEBI. 

*Inserted by SEBI (LODR)(Sixth Amendment) Regulations, 2021, w.e.f 01.04.22

Exemption:

The approval shall not be required for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

(b) Audit Committee to define Material Modifications in Related Party Transactions and disclose it as a part of Policy on Materiality of Related Party Transactions and on Dealing with Related Party Transactions. 

(c)  Only those members of Audit Committee who are Independent Directors shall approve such RPTs and subsequent material modifications therein. 

(d) RPTs in which the Company is not a party but Subsidiary is a party, shall require prior approval of the Audit Committee of the Company, if the value of such transaction(s) during a financial year exceeds: 

(i)  W.e.f. 1st April 2022, 10% of the annual consolidated turnover as per the last audited financial statements of the Company; 

(ii)  W.e.f. 1st April 2023, 10% of the annual standalone turnover as per the last audited financial statements of the subsidiary. 

Exemption:

Prior approval shall not be applicable in the following cases:

(a) *RPT to which listed subsidiary is a party but the Company in not a party, if Regulation 23 and Regulation 15(2) are applicable to listed subsidiary. For RPT of unlisted subsidiaries of the listed subsidiaries, the prior approval of the audit committee of the listed subsidiary shall suffice.

(b)  transactions entered into between two government companies;

(c)  transactions entered into between a holding company and its wholly owned subsidiary whose  accounts are  consolidated  with  such  holding  company  and  placed  before  the shareholders at the general meeting for approval.

*(c) transactions entered  into  between  two  wholly-owned  subsidiaries  of  the  listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. 

* Inserted by SEBI (LODR)(Sixth Amendment) Regulations, 2021, w.e.f 01.04.22

(1)   The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval

(2) The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: –

(a) repetitiveness of the transactions (in past or in future);

(b) justification for the need of omnibus approval.

(3) The Audit Committee shall satisfy itself on the need for omnibus approval for transactions of repetitive nature and that such approval is in the interest of the company.

(4) The omnibus approval shall contain or indicate the following: –

(a) name of the related parties;

(b) nature and duration of the transaction;

(c) maximum amount of transaction that can be entered into;

(d) the indicative base price or current contracted price and the formula for variation in the price, if any; and

(e) any other information relevant or important for the Audit Committee to take a decision on the proposed transaction:

Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may make omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction. 

(5) Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year.

(6) Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the company. 

Exemption:

The approval shall not be required for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. 

(1)   the audit committee shall lay down the criteria for granting the omnibus approval in  line  with  the  policy  on  related  party  transactions  of  the  listed  entity  and  such approval shall be applicable in respect of transactions which are repetitive in nature;

(2)   the  audit  committee  shall  satisfy  itself  regarding  the  need  for  such  omnibus approval and that such approval is in the interest of the listed entity;

(3)   the omnibus approval shall specify:

• the  name(s)  of  the  related  party,  nature  of  transaction,  period  of transaction, maximum amount of transactions that shall be entered into,
• the indicative base price / current contracted price and the formula for variation in the price if any; and
• such other conditions as the audit committee may deem fit:

Provided that where the need for related party transaction cannot be foreseen and  aforesaid  details  are  not  available,  audit  committee  may  grant  omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction.

(4) the audit committee shall review, atleast on a quarterly basis, the details of related party  transactions  entered  into  by  the  listed  entity  pursuant  to  each  of  the  omnibus approvals given.

(5)   Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year: 

Exemption:

The same as in the case of Audit Committee Approval as stated above.

(a)  which are in Ordinary Course of Business and not at arm’s length basis;

(b)  which are not in Ordinary Course of Business and not at arm’s length basis; and

(c)  all Material Transactions

shall also be approved by the Board of Directors at a meeting or through a Resolution passed by Circulation in the case of urgent requirements, in the interest of the Company subject to ratification at their next following Board Meeting.

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.

Exemption:

Approval shall not be required for:

1.  transactions entered into by the company in its ordinary course of business and on an arm’s length basis.

2.  transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

Exemption:

Approval shall not be required for:

3. transactions entered into by the company in its ordinary course of business and on an arm’s length basis.

4. transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

(i)  sale, purchase or supply of any goods or material, directly or through appointment of agent,  amounting to ten percent or more of the turnover of the company.

(ii) selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent, amounting to ten percent or more of net worth of the company.

(iii) leasing of property of any kind amounting to ten percent or more of the turnover of the company.

(iv) availing or rendering of any services, directly or through appointment of agent,  amounting to ten percent or more of the turnover of the company.

Explanation.- It is hereby clarified that the limits specified in sub-clause (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.

(v)  for appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and a half lakh rupees.

(vi) is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one percent of the net worth.

Explanation.- (1) The turnover or net worth referred above  shall be computed on the basis of the audited financial statement of the preceding financial year.

Exemption:

The same as in the case of Audit Committee Approval as stated above.

(1) the transaction(s) entered individually or together with previous transactions during a financial year, exceeding Rs.1000 crore or 10% of Annual Consolidated Turnover of the Company as per the last audited financial statements, whichever is lower. 

(2) transaction involving  payments  made  to  a  related  party  with  respect  to  brand  usage  or  royalty, if the transaction(s) to be entered into individually or taken together with previous  transactions  during  a  financial  year,  exceed five percent  of  the  annual consolidated  turnover  of  the  listed  entity  as  per  the  last  audited  financial  statements  of  the listed entity.

*Inserted by SEBI (LODR)(Sixth Amendment) Regulations, 2021, w.e.f 01.04.22