“Related Party” with reference to a company includes the following persons and entities:

Direct Relationship

  • Director or his relative
  • Key Managerial Personnel (KMP) or his relative

Entities Connected with Director / KMP

  • Firm in which a director, manager or their relative is a partner
  • Private company in which a director or manager or their relative is a member or director
  • Public company in which a director or manager is a director and holds (with relatives) more than 2% of paid-up share capital

Control / Influence Based Relationship

  • Any body corporate whose Board, MD or manager acts on the advice, directions or instructions of a director or manager

  • Any person on whose advice, directions or instructions a director or manager is accustomed to act

Important Exception

  • Advice, directions or instructions given in professional capacity are not covered

Group / Corporate Structure

  • Holding company
  • Subsidiary company
  • Associate company
  • Subsidiary of a common holding company
  • Investing company or venturer of the company

Other Prescribed Persons

Any other person as may be prescribed under law.

Explanation

Investing company or venturer means a body corporate whose investment results in the company becoming its associate company.

đź’ˇ Pro Tip

Always identify related parties before entering into transactions to ensure compliance with Section 188.

Not sure whether a transaction falls under Related Party?

MeraFinanceWala can help you identify, structure and stay compliant under the Companies Act.