24 March 2022
Related Parties Examples 1. A director or his relative (Relative means a member of the same HUF, husband, wife, father, stepfather, mother, stepmother, son, stepson, son’s wife, daughter, daughter’s husband, brother, stepbrother, sister, step-sister) Mr L, Mr M and Mr N are directors and the relatives of these Directors are considered as related parties. 2. Key managerial personnel or his relative Say, Mr O is a Company secretary, his relatives will be considered related parties 3. A firm in which a director, manager, or relative is a partner Mr L is a partner at RST. Pvt. Ltd, another firm. This firm will also be considered as a related party. 4. A private company in which a director, manager, or relative is a member or director Mr. M is a director in M Pvt Ltd – In this case M Pvt. ltd becomes a related party. Even when Mr. M’s relative is a member or director in M Pvt ltd, this company will be considered as a related party. 5. 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 capital Mr. N along with his relatives holds more than 2% of the paid-up capital of N ltd. In this case, N Ltd will be considered as a related party. 6. Any body corporate whose board of directors, MD or manager is required to act in accordance with the advice, directions or instructions of a director or manager (NA in cases when these directions are followed in a professional capacity) When P Ltd acts on the directions of Mr. L, P Ltd will be a related party. 7. Any person on whose advice, directions or instructions a director or manager is required to act (NA when this is done in a professional capacity) Mr A holding 51% in LMN Ltd on whose advice Mr L has to act will be considered as a related party. 8. Holding, Subsidiary or Associate of such company These all will be considered as related parties: – ABC Ltd holding 51% in LMN Ltd (Holding Company) – LMN Ltd holding 51% in XYZ Ltd (Subsidiary Company) – DEF Ltd holding 30% in LMN Ltd (Associate Company) 9. Any company which is a subsidiary of a holding company to which it is also a subsidiary
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